SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997 Commission file number 2-20111
COUSINS PROPERTIES INCORPORATED
A GEORGIA CORPORATION
I.R.S. EMPLOYER IDENTIFICATION NO. 58-0869052
2500 WINDY RIDGE PARKWAY
ATLANTA, GEORGIA 30339
TELEPHONE: 770-955-2200
Name of exchange on which registered: New York Stock Exchange
Securities registered pursuant to Section 12(b)of the Act: Common Stock ($1
Par Value)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
As of March 11, 1998, 31,528,348 common shares were outstanding; and the
aggregate market value of the common shares of Cousins Properties Incorporated
held by nonaffiliates was $691,462,109.
[OBJECT OMITTED]DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents have been incorporated by reference into the
designated Part of this Form 10-K:
Registrant's Proxy Statement Part III, Items 10, 11, 12 and 13
dated March 27, 1998
Registrant's Annual Report to Part II, Items 5, 6, 7 and 8
Stockholders for the year
ended December 31, 1997
<PAGE>
Explanatory note: The registrant is filing this Annual Report on Form 10-K/A to
correct an error in the Registrant's original Report on Form 10-K for the year
ended December 31, 1997. Exhibit 23 (a), Consent of Independent Public
Accountants, has been changed.
<PAGE>
PART I
------
Item 1. Business
- --------------------
Corporate Profile
Cousins Properties Incorporated (the "Registrant" or "Cousins") is a
Georgia corporation, which since 1987 has elected to be taxed as a real estate
investment trust ("REIT"). Cousins Real Estate Corporation ("CREC"), a taxable
entity consolidated with the Registrant, owns, develops, and manages a portion
of the Company's real estate portfolio. Cousins MarketCenters, Inc. ("CMC") is a
subsidiary of CREC which develops retail shopping centers. The Registrant,
together with CREC, CMC and their other consolidated entities, is hereafter
referred to as the "Company."
Cousins is an Atlanta-based, fully integrated, self administered equity
real estate investment trust. The Company has extensive experience in the real
estate industry, including the acquisition, financing, development, management
and leasing of properties. Cousins has been a public company since 1962, and its
common stock trades on the New York Stock Exchange. The Company owns a portfolio
of well-located, high-quality retail, office, medical office and land
development projects and holds several tracts of strategically located
undeveloped land. The strategies employed to achieve the Company's investment
goals include the development of properties which are substantially precommitted
to quality tenants; maintaining high levels of occupancy within owned
properties; the selective sale of assets and the acquisition of quality
income-producing properties at attractive prices. The Company also seeks to be
opportunistic and take advantage of normal real estate business cycles.
Unless otherwise indicated, the notes referenced in the discussion
below are the "Notes to Consolidated Financial Statements" included in the
financial section of the Registrant's 1997 Annual Report to Stockholders.
Brief Description of Company Investments
Office. As of March 15, 1998, the Company owns, directly and
indirectly, equity interests of at least 50% (excluding One Ninety One Peachtree
Tower) in the following twenty-two commercial office buildings:
<TABLE>
<CAPTION>
Company's
Metropolitan Rentable Ownership Percent
Property Description Area Square Feet Interest Leased
-------------------- ------------ ----------- -------- -------
<S> <C> <C> <C> <C>
101 Independence Center Charlotte, NC 522,000 100% 93%
First Union Tower Greensboro, NC 319,000 100% 93%
3100 Windy Hill Road Atlanta, GA 188,000 100% 100%
Grandview II Birmingham, AL 150,000 100% (b) 64% (a)
Carlyle I Alexandria, VA 150,000 100% 58% (a)
615 Peachtree Street Atlanta, GA 147,000 100% 73%
333 North Point Center East Atlanta, GA 129,000 100% 41% (a)
200 North Point Center East Atlanta, GA 129,000 100% 100%
100 North Point Center East Atlanta, GA 128,000 100% 100%
3301 Windy Ridge Parkway Atlanta, GA 106,000 100% 100%
NationsBank Plaza Atlanta, GA 1,260,000 50% 95%
3200 Windy Hill Road Atlanta, GA 685,000 50% 98%
2300 Windy Ridge Parkway Atlanta, GA 634,000 50% 98%
The Pinnacle Atlanta, GA 424,000 50% 33% (a)
2500 Windy Ridge Parkway Atlanta, GA 313,000 50% 98%
Two Live Oak Center Atlanta, GA 278,000 50% 88% (a)
4200 Wildwood Parkway Atlanta, GA 260,000 50% 100%
Ten Peachtree Place Atlanta, GA 259,000 50% 100%
John Marshall-II Washington, D.C. 224,000 50% 100%
4300 Wildwood Parkway Atlanta, GA 150,000 50% 100%
4100 Wildwood Parkway Atlanta, GA 100,000 50% 100%
One Ninety One Peachtree Tower Atlanta, GA 1,215,000 9.8% 93%
---------
7,770,000
=========
</TABLE>
<PAGE>
(a) Under construction or in lease-up.
(b) This project is actually owned in a venture in which a portion of
the upside is shared with the other venturer. See "Major
Properties" - "Office Properties Under Construction" - "Grandview
II" where discussed.
The weighted average leased percentage of these office buildings
(excluding all properties currently under construction or in lease-up and One
Ninety One Peachtree Tower as it is less than 50% owned by the Company) was
approximately 97% as of March 15, 1998 and the leases expire as follows:
<TABLE>
<CAPTION>
2007
&
1998 1999 2000 2001 2002 2003 2004 2005 2006 Thereafter Total
---- ---- ---- ---- ---- ---- ---- ---- ---- ---------- -----
OFFICE
- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Consolidated:
- -------------
Square Feet
Expiring (d) 57,641 68,621 271,192 260,923 31,287 121,574 96,477 0 209,869 322,592 1,440,176(b)
% of Leased Space 4% 5% 19% 18% 2% 8% 7% 0% 15% 22% 100%
Annual Base
Rent (a) 625,859 1,136,727 3,448,141 3,913,709 471,674 1,111,963 1,518,170 0 3,312,660 6,758,530 22,297,433
Annual Base
Rent/Sq. Ft. (a) 10.86 16.57 12.71 15.00 15.08 9.15 15.74 0 5.78 20.95 15.48
Joint Venture:
- --------------
Square Feet
Expiring (d) 115,957 28,586 165,283 450,062 353,285 235,906 88,732 363,770 375,971 1,618,894 3,796,446(c)
% of Leased Space 3% 1% 4% 12% 9% 6% 2% 10% 10% 43% 100%
Annual Base
Rent (a) 1,799,176 473,739 3,344,293 6,010,569 5,118,825 4,251,138 1,647,306 6,958,204 6,854,418 40,621,535 77,079,203
Annual Base
Rent/Sq. Ft.(a) 15.52 16.57 20.23 13.35 14.49 18.02 18.56 19.13 18.23 25.09 20.30
Total (including only Company's 50% share of Joint Venture Properties):
- -----------------------------------------------------------------------
Square Feet
Expiring (d) 115,620 82,914 353,834 485,954 207,930 239,527 140,843 181,885 397,855 1,132,037 3,338,399
% of Leased Space 3% 2% 11% 15% 6% 7% 4% 5% 12% 35% 100%
Annual Base
Rent (a) 1,525,447 1,373,597 5,120,288 6,918,994 3,031,087 3,237,532 2,341,823 3,479,102 6,739,869 27,069,296 60,837,035
Annual Base
Rent/Sq. Ft.(a) 13.19 16.57 14.47 14.24 14.58 13.52 16.63 19.13 16.94 23.91 18.22
(a) Annual base rent excludes the operating expense reimbursement portion of
the rent payable. If the lease does not provide for pass through of such
operating expense reimbursements, an estimate of operating expenses is
deducted from the rental rate shown. The base rental rate shown is the
estimated rate in the year of expiration. Amounts disclosed are in dollars.
(b) Rentable square feet leased as of March 15, 1998 out of 1,539,000 total
rentable square feet.
(c) Rentable square feet leased as of March 15, 1998 out of 3,885,000 total
rentable square feet.
(d) Except as follows, where a tenant has the option to cancel its lease without
penalty, the lease expiration date used in the table above reflects the
cancellation option date rather than the lease expiration date. One of
the joint venture leases (50,242 square feet) has the right to terminate
effective March 31, 2001, if notice is given by April 1, 2000.
The weighted average remaining lease term of these sixteen office
buildings was approximately 8 years as of March 15, 1998. Most of the Company's
leases in these buildings provide for pass through of operating expenses, and
base rents which escalate over time.
</TABLE>
<PAGE>
Retail. As of March 15, 1998, the Company's retail portfolio includes the
following eleven properties:
<TABLE>
<CAPTION>
Rentable Company's
Metropolitan Square Feet Ownership Percent
Property Description Area (Company Owned) Interest Leased
-------------------- ------------ --------------- --------- -------
<S> <C> <C> <C> <C>
Colonial Plaza MarketCenter Orlando, FL 493,000 (a) 100% 91%
Greenbrier MarketCenter Chesapeake, VA 478,000 100% 100%
North Point MarketCenter Atlanta, GA 398,000 100% 100%
The Shops at Palos Verdes Rolling Hills Estates, CA 380,000 100% (b)
Presidential MarketCenter Atlanta, GA 361,000 (c) 100% 99%
Perimeter Expo Atlanta, GA 171,000 100% 99%
Los Altos MarketCenter Long Beach, CA 157,000 100% 100%
Laguna Niguel Promenade Laguna Niguel, CA 153,000 100% 75% (b)
Mansell Crossing Phase II Atlanta, GA 103,000 100% 100%
Abbotts Bridge Station Atlanta, GA 83,000 100% 95% (b)
Haywood Mall Greenville, SC 330,000 50% 84%
---------
3,107,000
=========
(a) Includes 16,000 square feet not yet under construction.
(b) Under renovation, construction or lease-up.
(c) Includes 21,000 square feet not yet under construction.
</TABLE>
The weighted average leased percentage of these retail properties
(excluding the properties currently under renovation, construction or lease-up
and Haywood Mall) was approximately 97% as of March 15, 1998, and the leases of
these retail properties (excluding Haywood Mall and The Shops at Palos Verdes)
expire as follows:
<TABLE>
<CAPTION>
2007
&
1998 1999 2000 2001 2002 2003 2004 2005 2006 Thereafter Total
---- ---- ---- ---- ---- ---- ---- ---- ---- ---------- -----
RETAIL
- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Square Feet
Expiring 2,580 51,321 47,626 90,079 111,475 10,360 51,267 46,097 175,845 1,501,042 2,087,692(b)
% of Leased Space 0% 3% 2% 5% 5% 1% 2% 2% 8% 72% 100%
Annual Base
Rent (a) 54,180 949,919 656,185 1,446,889 1,676,985 152,874 638,291 532,730 1,589,098 19,178,050 26,875,201
Annual Base
Rent/Sq. Ft. (a) 21.00 18.51 13.78 16.06 15.04 14.76 12.45 11.56 9.04 12.78 12.87
(a) Annual base rent excludes the operating expense reimbursement portion of
the rent payable and any percentage rents due. If the lease does not
provide for pass through of such operating expense reimbursements, an
estimate of operating expenses is deducted from the rental rate shown.
The base rental rate shown is the estimated rate in the year of expiration
Amounts disclosed are in dollars.
(b) Gross leasable area leased as of March 15, 1998 out of 2,159,000 total
gross leasable area.
The weighted average remaining lease term of these seven retail
properties was approximately 13 years as of March 15, 1998. All of the major
tenant leases in these retail properties have lease terms of 10 years or more
from the date of initial occupancy and provide for pass through of operating
expenses and base rents which escalate over time.
</TABLE>
Medical Office. As of March 15, 1998, the Company owned the following
medical office properties:
<TABLE>
<CAPTION>
Company's
Metropolitan Rentable Ownership Percent
Property Description Area Square Feet Interest Leased
-------------------- ------------ ----------- --------- -------
<S> <C> <C> <C> <C>
Meridian Mark Plaza Atlanta, GA 159,000 100% 66% (a)
Presbyterian Medical Plaza
at University Charlotte, NC 69,000 100% 100%
-------
228,000
=======
(a) Under construction and lease-up.
</TABLE>
The weighted average leased percentage of the one medical office
building (excluding the building currently under construction and lease-up) was
approximately 100% as of March 15, 1998 and the leases of this property expire
as follows:
<TABLE>
<CAPTION>
2007
&
1998 1999 2000 2001 2002 2003 2004 2005 2006 Thereafter Total
---- ---- ---- ---- ---- ---- ---- ---- ---- ---------- -----
MEDICAL OFFICE
- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Square Feet Expiring 0 0 0 0 1,397 0 0 3,445 0 63,862 68,704
% of Leased Space 0% 0% 0% 0% 2% 0% 0% 5% 0% 93% 100%
Annual Base Rent (a) 0 0 0 0 27,242 0 0 67,178 0 1,213,378 1,307,798
Annual Base Rent/Sq. Ft.(a) 0 0 0 0 19.50 0 0 19.50 0 19.00 19.04
(a) Annual base rent excludes the operating expense reimbursement portion of
the rent payable and any percentage rents due. If the lease does not provide
for pass through of such operating expense reimbursements, an estimate of
operating expenses is deducted from the rental rate shown. The base rental
rate shown is the estimated rate in the year of expiration. Amounts
disclosed are in dollars.
</TABLE>
The weighted average remaining lease term of the one medical office
building (excluding the building currently under construction and lease-up) was
approximately 13 years as of March 15, 1998. The Company's leases in this
building provide for pass through of operating expenses and base rents which
escalate over time.
Other. The Company's other real estate holdings include equity
interests in approximately 445 acres of strategically located land held for
investment and future development at North Point and Wildwood Office Park, the
option to acquire the fee simple interest in approximately 11,300 acres of land
through its Temco Associates joint venture, and two mortgage notes for $28
million which are secured by a 250,000 square foot office building in
Washington, D.C. The terms of these two notes have some of the characteristics
of an equity investment, and should provide a comparable return on investment
(see Note 3).
The Company's joint venture partners include IBM and affiliates of The
Coca-Cola Company ("Coca-Cola"), NationsBank Corporation ("NationsBank"),
Corporate Property Investors, Temple-Inland Inc., Cornerstone Properties, Inc.,
American General Corporation, and CarrAmerica Realty Corporation.
The success of the Company's operations is dependent upon such
unpredictable factors as the availability of satisfactory financing; general and
local economic conditions; the activity of others developing competitive
projects; the cyclical nature of the real estate industry; and zoning,
environmental impact, and other government regulations.
Refer to Item 2 hereof for a more detailed description of the Company's
real estate properties.
Significant Changes in 1997
Significant changes in the Company's business and properties during the
year ended December 31, 1997 were as follows:
Office Properties. In April 1997, the Company purchased the land on
which construction commenced on Grandview II, a 150,000 rentable square foot
office building in Birmingham, Alabama.
Effective July 31, 1997, Cousins LORET Venture, L.L.C. ("the Venture")
was formed between the Company and LORET Holdings, L.L.L.P. ("LORET"), each as
50% members. LORET contributed Two Live Oak Center, a 278,000 rentable square
foot office building located in Atlanta, Georgia, which was recently renovated
and is in the process of being leased up. Two Live Oak Center became partially
operational for financial reporting purposes in October 1997. In August 1997,
Cousins LORET Venture, L.L.C. commenced construction on The Pinnacle, a 424,000
rentable square foot office building located adjacent to Two Live Oak Center
(see Note 5).
In November 1997, the Company purchased approximately .6 acres of
undeveloped land in downtown San Francisco, California which is entitled for an
approximately 381,000 rentable square foot office building. The Company is
currently pursuing predevelopment and investigative work to confirm the
feasibility of developing this office building.
Retail Properties. In January 1997, the Company purchased the land for,
and commenced construction of Abbotts Bridge Station, an approximately 83,000
square foot neighborhood retail center in suburban Atlanta, Georgia. In August
1997, the Company purchased the land for, and commenced construction of Laguna
Niguel Promenade, an approximately 153,000 square foot retail center in Laguna
Niguel, California.
On July 1, 1997, CREC sold Rivermont Station and Lovejoy Station, two
Atlanta neighborhood retail centers with 90,000 and 77,000 square feet,
respectively, for $20.1 million, which was approximately $4.0 million over the
cost of the centers. Including depreciation recapture of approximately $.5
million and net of an income tax provision of approximately $1.5 million, the
net gain on the sale was approximately $3.0 million.
Medical Office Properties. In August 1997, Presbyterian Medical Plaza
at University, a 69,000 rentable square foot medical office building became
partially operational for financial reporting purposes. In September 1997, the
Company commenced construction on Meridian Mark Plaza, a 159,000 rentable square
foot medical office building located in Atlanta, Georgia.
Financings. Three new financings were completed during 1997. On March
20, 1997, Wildwood Associates completed the financing of the 4100 and 4300
Wildwood Parkway Buildings with a $30 million non-recourse mortgage note payable
at a 7.65% interest rate and maturity of April 1, 2012. On July 30, 1997, the
Company completed the financing of the 100 and 200 North Point Center East
Buildings with a $25 million non-recourse mortgage note payable at a 7.86%
interest rate and maturity of August 1, 2007. On September 30, 1997, Cousins
LORET Venture, L.L.C. completed the financing of Two Live Oak Center with a $30
million non-recourse mortgage note payable at a 7.9% interest rate and a
maturity of October 1, 2007.
Effective June 30, 1997, the Company extended the maturity of its $100
million line of credit from June 30, 1997 to June 29, 1998. The line is
unsecured and bears interest tied to the Federal Funds rate. The Company had no
borrowings under the line as of December 31, 1997.
In November 1997, Cousins LORET Venture, L.L.C. received a commitment
for the financing of The Pinnacle office building which is expected to close in
the second quarter of 1998 and will be drawn down as needed, with the full
amount funded by December 1998. The $70 million non-recourse mortgage note
payable has an interest rate of 7.11% and term of twelve years.
Common Stock Issuance. In December 1997, the Company issued 2,150,000
shares of common stock through a public offering at a price of $31.5625 per
share. The Company has used the proceeds to reduce debt and develop
income-producing properties.
Subsequent Events
Subsequent to year-end, in January 1998, the Company purchased the land
for, and commenced construction on, Carlyle I, an approximately 150,000 rentable
square foot office building in Alexandria, Virginia.
Subsequent to year-end, in February 1998, the Company purchased The
Shops at Palos Verdes, located in Rolling Hills Estates, California, in the
greater Los Angeles metropolitan area. This 355,000 square foot center includes
existing retail space and a parking deck. The Company plans to reposition and
remerchandise the project into an approximately 380,000 square foot open-air,
high-end specialty center.
Executive Offices
The Registrant's executive offices are located at 2500 Windy Ridge
Parkway, Suite 1600, Atlanta, Georgia 30339-5683. At December 31, 1997, the
Company employed 180 people.
<PAGE>
I-15
Item 2. Properties
- ----------------------
Table of Major Properties
The following tables set forth certain information relating to major
office and retail properties, stand alone retail lease sites, medical office
properties and land held for investment and future development in which the
Company has a 50% or greater ownership interest. All information presented is as
of December 31, 1997, except leasing information which is as of March 15, 1998.
Dollars are stated in thousands.
<TABLE>
<CAPTION>
Percentage
Description, Year Rentable Leased Average Major
Location Development Company's Square Feet as of 1997 Major Tenants (lease Tenants'
and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable
Zip Code or Acquired Partner Interest as Noted 1998 Occupancy expiration) Sq. Feet
- ------------ ----------- ------------- ---------- ---------- ---------- --------- -------------------- --------
Office
- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Wildwood Office Park:
Suburban Atlanta, GA
2300 Windy
Ridge Parkway
30339-5671 1987 IBM 50% 634,000 98% 98% IBM (2002/2012) 240,430
12 Acres Manhattan Associates, LLC 63,296
(2002/2007)
Electrolux (2000/2005) 62,576
Computer Associates 62,445
(2005/2010)
Financial Services 56,932
Corporation
(2006/2011)(2)
Chevron USA (2001) 50,242
2500 Windy
Ridge Parkway
30339-5683 1985 IBM 50% 313,000 98% 95% Coca-Cola Enterprises Inc. 165,180
8 Acres (2003/2008)
3200 Windy
Hill Road
30339-5609 1991 IBM 50% 685,000 98% 97% IBM (2001/2011)(3) 436,539
15 Acres Equifax (4) (1998/2003) 68,402
W.H. Smith Inc. 41,858
(2002/2007)
3301 Windy Ridge
Parkway
30339-5685 1984 N/A 100% 106,000 100% 80% Indus International, 106,000
10 Acres Inc.(4) (2003/2008)
3100 Windy Hill
Road
30339-5605 1983 N/A (5) 188,000 100% 100% IBM (2006) 188,000
13 Acres
</TABLE>
<TABLE>
<CAPTION>
Adjusted
Cost and
Adjusted
Debt
Description, Depreciation Maturity
Location and and
and Amortization Debt Interest
Zip Code (1) Balance Rate
- ------------ ------------ ------- --------
Office
- ------
<S> <C> <C> <C>
Wildwood Office Park:
Suburban Atlanta, GA
2300 Windy
Ridge Parkway
30339-5671 $77,774 $ 69,995 12/1/05
$51,222 7.56%
2500 Windy
Ridge Parkway
30339-5683 $29,318 $ 24,781 12/15/05
$18,202 7.45%
3200 Windy
Hill Road
30339-5609 $80,997 $ 69,389 1/1/07
$59,971 8.23%
3301 Windy Ridge
Parkway
30339-5685 $10,467 $ 0 N/A
$ 6,559
3100 Windy Hill
Road
30339-5605 $17,005 (5) $ 0 N/A
$16,325 (5)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Percentage
Description, Year Rentable Leased Average Major
Location Development Company's Square Feet as of 1997 Major Tenants (lease Tenants'
and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable
Zip Code or Acquired Partner Interest as Noted 1998 Occupancy expiration) Sq. Feet
- ------------ ----------- ------------- ---------- ---------- ---------- --------- -------------------- --------
Office (Continued)
- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
4100 and 4300
Wildwood Parkway
30339-8400 1996 IBM 50% 250,000 100% 100% Georgia-Pacific 250,000
13 Acres Corporation (2012/2017)
(6)(7)
4200 Wildwood Parkway
30339-8402 1997 IBM 50% 260,000 100% (8) General Electric 260,000
8 Acres (2014/2024)(8)
NationsBank Plaza
Atlanta, GA
30308-2214 1992 NationsBank (4) 50% (9) 1,260,000 95% 92% NationsBank (4) 572,742
4 Acres (2012/2042)
Ernst & Young LLP 203,397
(2007/2017)
Troutman Sanders 201,320
(2007/2017)
Paul Hastings (2012/2017) 92,224
Hunton & Williams 69,699
(2004/2009)
First Union Tower
Greensboro, NC
27401-2167 1990 N/A 100% 319,000 93% 93% Smith Helms Mullis & 70,360
1 Acre Moore (2000/2015)
First Union Bank (4) 62,622
(2009/2019)
Halstead Industries 60,253
(2000/2005)
Ten Peachtree Place
Atlanta, GA
30309-3814 1991 Coca-Cola (4) 50% (9) 259,000 100% 100% Coca-Cola (4) (2001/2006) 259,000
5 Acres
John Marshall-II
Suburban
Washington, D.C.
22102-3802 1996 CarrAmerica Realty 50% 224,000 100% 100% Booz-Allen & Hamilton 224,000
Corporation (4) 3 Acres (2011/2016)
100 North Point Center East
Suburban Atlanta, GA
30022-4885 1995 N/A 100% 128,000 100% 100% Schweitzer-Mauduit 39,739
7 Acres International, Inc.
(2001/2007)
Green Tree Financial 21,914
(2006/2011)(6)
</TABLE>
<TABLE>
<CAPTION>
Adjusted
Cost and
Adjusted
Debt
Description, Depreciation Maturity
Location and and
and Amortization Debt Interest
Zip Code (1) Balance Rate
- ------------ ------------ ------- --------
Office (Continued)
- ------------------
<S> <C> <C> <C>
Wildwood Parkway
30339-8400 $26,363 $ 29,696 4/1/12
$24,755 7.65%
4200 Wildwood Parkway
30339-8402 $19,670 $ 0 N/A
(8)
NationsBank Plaza
Atlanta, GA
30308-2214 $218,978 $ 0(10) N/A (10)
$182,043
First Union Tower
Greensboro, NC
27401-2167 $ 33,962 $ 0 N/A
$ 22,897
Ten Peachtree Place
Atlanta, GA
30309-3814 $ 23,474 $ 19,355 11/30/01(11)
$ 19,735 8.00%
John Marshall-II
Suburban
Washington, D.C.
22102-3802 $ 29,917 $ 23,673 4/1/13
$ 27,797 7.00%
100 North Point Center East
Suburban Atlanta, GA
30022-4885 $ 12,791 $ 12,446(12) 8/1/07
$ 11,594 7.86%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Percentage
Description, Year Rentable Leased Average Major
Location Development Company's Square Feet as of 1997 Major Tenants (lease Tenants'
and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable
Zip Code or Acquired Partner Interest as Noted 1998 Occupancy expiration) Sq. Feet
- ------------ ----------- ------------- ---------- ---------- ---------- --------- -------------------- --------
Office (Continued)
- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
200 North Point Center East
Suburban Atlanta, GA
30022-4885 1996 N/A 100% 129,000 100% 94% Alltel Telecom Information 60,029
9 Acres Services, Inc. (1999/2000)
Motorola, Inc. (2001/2011) 26,897
APAC Teleservices, Inc. 22,409
(2004/2009)
333 North Point Center East
Suburban Atlanta, GA
30022-8274 (13) N/A 100% 129,000 41%(13) (13) J.C. Bradford (2005/2010)(13) 22,222
9 Acres
615 Peachtree Street
Atlanta, GA
30308-2312 1996 N/A 100% 147,000 73% 86% Wachovia (4)(2001/2007) 51,561
2 Acres McCann Erickson (1998) 28,967
101 Independence Center
Charlotte, NC
28246-1000 1996 N/A 100% 522,000 93% 96% NationsBank(4) 359,796
2 Acres (2008/2028)(14)
Robinson Bradshaw & Hinson, 64,893
P.A. (2004/2009)
Ernst & Young LLP (2001/2006) 33,962
Carlyle I
Alexandria, VA
22314-9999 (15) N/A 100% 150,000 58%(15) (15) A.T. Kearney (2009/2019)(15) 87,455
1 Acre
101 Second Street
San Francisco, CA
94105-3601 (9) Myers Second 100% (9) 381,000 (9) (9) (9) (9)
Street Company .63 Acres
LLC
Two Live Oak Center
Atlanta, GA
30326-1234 1997 LORET 50% 278,000 88% 30%(16) Sales Technologies, Inc. 75,484
Holdings, L.L.L.P. 2 Acres (2007/2017)
Chubb & Son, Inc. (4) 48,520
(2007/2017)
The Pinnacle
Atlanta, GA
30326-1234 (13) LORET 50% 424,000 33%(13) (13) PaineWebber (2013/2018) 47,631
Holdings, L.L.L.P. 4 Acres (13)(6)
A.T. Kearney (2009/2019)(13) 47,566
Merrill Lynch 46,440
(2008/2013)(13)
</TABLE>
<TABLE>
<CAPTION>
Adjusted
Cost and
Adjusted
Debt
Description, Depreciation Maturity
Location and and
and Amortization Debt Interest
Zip Code (1) Balance Rate
- ------------ ------------ ------- --------
Office (Continued)
- ------------------
<S> <C> <C> <C>
200 North Point Center East
Suburban Atlanta, GA
30022-4885 $ 11,487 $ 12,447(12) 8/1/07
$ 10,768 7.86%
333 North Point Center East
Suburban Atlanta, GA
30022-8274 $ 10,583 $ 0 N/A
(13)
615 Peachtree Street
Atlanta, GA
30308-2312 $ 11,670 $ 0 N/A
$ 11,010
101 Independence Center
Charlotte, NC
28246-1000 $ 73,515 $ 48,928 11/1/07
$ 70,615 8.22%
Carlyle I
Alexandria, VA
22314-9999 (15) $ 0 N/A
101 Second Street
San Francisco, CA
94105-3601 $ 11,698 $ 0 N/A
(9)
Two Live Oak Center
Atlanta, GA
30326-1234 $ 48,000 $ 30,000 10/01/07
$ 47,506 7.9%
The Pinnacle
Atlanta, GA
30326-1234 $ 18,501 (17) (17)
(13)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Percentage
Description, Year Rentable Leased Average Major
Location Development Company's Square Feet as of 1997 Major Tenants (lease Tenants'
and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable
Zip Code or Acquired Partner Interest as Noted 1998 Occupancy expiration) Sq. Feet
- ------------ ----------- ------------- ---------- ---------- ---------- --------- -------------------- --------
Office (Continued)
- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Grandview II
Birmingham, AL
35243-1930 (13) Daniel 100% 150,000 64%(13) (13) TXEN, Inc. (2008/2013)(13) 52,112
Realty Company 8 Acres Daniel Realty Company 20,097
(9) (2008)(13)
Retail Centers and Malls
Haywood Mall
Greenville, SC
29607-2749 1977/1995 Corporate 50% 1,256,000 91% 88% Sears (19) N/A
Property 86 acres overall of J.C. Penney (19) N/A
Investors (4) of which 84% of owned Rich's (19) N/A
330,000 and owned Belk (19) N/A
21 acres are Dillard's (19) N/A
owned (18)
Perimeter Expo
Atlanta, GA
30338-1519 1993 N/A 100% 291,000 99% 99% The Home Depot Expo (19) N/A
19 acres overall of Marshalls (2014/2029) 36,598
of which 99% of Company Best Buy (2014/2029) 36,000
171,000 and Company owned Linens `N Things (2014/2024) 30,351
10 acres are owned Office Max (2013/2033) 23,500
owned by The Sport Shoe (2004/2014) 14,348
the Company Gap's Old Navy Store 13,939
(2002/2012)
North Point MarketCenter
Suburban
Atlanta, GA
30202-4889 1994/1995 N/A 100% 514,000 100% 99% Target (19) N/A
60 Acres (20) Babies "R" Us (2011/2031) 50,275
of which Media Play (2010/2025) 48,884
398,000 and Marshalls (2010/2025) 40,000
49 acres are Rhodes (2011/2021) 40,000
owned by Linens `N Things 35,000
the Company (2005/2025)
United Artists (2014/2034) 34,733
Circuit City (2015/2030) 33,420
PETsMART (2009/2029) 25,465
Gap's Old Navy Store 20,000
(2000/2010)
</TABLE>
<TABLE>
<CAPTION>
Adjusted
Cost and
Adjusted
Debt
Description, Depreciation Maturity
Location and and
and Amortization Debt Interest
Zip Code (1) Balance Rate
- ------------ ------------ ------- --------
Office (Continued)
- ------------------
<S> <C> <C> <C>
Grandview II
Birmingham, AL
35243-1930 $ 11,191 $ 0 N/A
(13)
Retail Centers and Malls
- ------------------------
Haywood Mall
Greenville, SC
29607-2749 $ 50,399 $ 0 N/A
$ 35,930
Perimeter Expo
Atlanta, GA
30338-1519 $ 19,769 $ 21,061 8/15/05
$ 17,983 8.04%
North Point MarketCenter
Suburban
Atlanta, GA
30202-4889 $ 27,003 $ 29,068 7/15/05
$ 23,929 8.50%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Percentage
Description, Year Rentable Leased Average Major
Location Development Company's Square Feet as of 1997 Major Tenants (lease Tenants'
and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable
Zip Code or Acquired Partner Interest as Noted 1998 Occupancy expiration) Sq. Feet
- ------------ ----------- ------------- ---------- ---------- ---------- --------- -------------------- --------
Retail Centers and Malls (Continued)
- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Presidential MarketCenter
Suburban
Atlanta, GA
30278-2149 1994/1996 N/A 100% 478,000 (21) 99% (21) 92% (21) Target (19) N/A
66 acres overall of Publix Super Market 56,146
of which 99% (21) Company (2019/2044)
361,000 (21) of Company owned Carmike Cinemas(5)(2023/2033) 44,565
and 49 acres owned MJDesigns (4) (2011/2026) 37,957
are owned Bed, Bath & Beyond (2008/2024)35,127
by the T.J. Maxx (2004/2014) 32,000
Company Office Depot, Inc. 31,628
(2011/2026)
Marshalls (2010/2025) 30,000
Colonial Plaza MarketCenter
Orlando, FL
32803-5029 1996 N/A 100% 493,000(22) 91%(22) 95%(22) Circuit City (2016/2036) 43,936
49 Acres Rhodes (2012/2027) 40,000
Baby Superstore, Inc.
(2006/2021) 40,000
Stein Mart, Inc. (2006/2026) 36,000
Barnes & Noble Superstores, 35,131
Inc.(2012/2022)
Linens `N Things 35,000
(2012/2027)
Marshalls (2012/2027) 30,400
Ross Stores (2007/2022) 28,000
Just For Feet, Inc. 26,667
(2012/2027)
Walgreen Co. (2012) 18,614
Gap's Old Navy Store 17,920
(2002/2012)
Mansell Crossing Phase II
Suburban
Atlanta, GA
30202-4822 1996 N/A 100% 103,000 100% 100% Bed Bath & Beyond 40,000
13 Acres (2012/2027)
Goody's Family Clothing, 32,144
Inc. (2009/2027)
Rooms To Go (2016/2036) 21,000
Greenbrier MarketCenter
Chesapeake, VA
23327-2840 1996 N/A 100% 478,000 100% 99% Target (2016/2046) 117,220
44 Acres Harris Teeter, Inc. 51,806
(2016/2036)
Bed Bath & Beyond 40,484
(2012/2027)
</TABLE>
<TABLE>
<CAPTION>
Adjusted
Cost and
Adjusted
Debt
Description, Depreciation Maturity
Location and and
and Amortization Debt Interest
Zip Code (1) Balance Rate
- ------------ ------------ ------- --------
Retail Centers and Malls (Continued)
- ------------------------------------
<S> <C> <C> <C>
Presidential MarketCenter
Suburban
Atlanta, GA
30278-2149 $ 23,722 $ 0 N/A
$ 22,251
Colonial Plaza MarketCenter
Orlando, FL
32803-5029 $ 40,543 $ 0 N/A
$ 38,502
Mansell Crossing Phase II
Suburban
Atlanta, GA
30202-4822 $ 8,913 $ 0 N/A
$ 8,622
Chesapeake, VA
23327-2840 $ 33,525 $ 0 N/A
$ 32,238
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Percentage
Description, Year Rentable Leased Average Major
Location Development Company's Square Feet as of 1997 Major Tenants (lease Tenants'
and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable
Zip Code or Acquired Partner Interest as Noted 1998 Occupancy expiration) Sq. Feet
- ------------ ----------- ------------- ---------- ---------- ---------- --------- -------------------- --------
Retail Centers and Malls (Continued)
- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Greenbrier MarketCenter (Continued) Baby Superstore, Inc. 40,000
(2006/2021)
Stein Mart, Inc. (2006/2026) 36,000
Kinetex, Inc. (2011/2026) 33,000
Barnes & Noble Superstores, 29,974
Inc. (2011/2026)
PETsMART (2011/2031) 26,052
Office Max (2011/2026) 23,484
Gap's Old Navy Store 14,000
(2001/2011)
Los Altos MarketCenter
Long Beach, CA
90815-3126 1996 N/A 100% 258,000 100% 97% Sears (19) N/A
19 Acres of Circuit City (4)(2017/2037) 38,541
which 157,000 Borders, Inc. (2017/2037) 30,000
and 17 Acres Bristol Farms (4)(2012/2032) 28,200
are owned by CompUSA, Inc. (2011/2021) 25,620
the Company Sav-on Drugs (4)(2016/2026) 16,914
Abbotts Bridge Station
Suburban Atlanta, GA
30097-5793 (13) N/A 100% 83,000 95%(13) (13) Harris Teeter, Inc. 40,406
17 Acres (2017/2037)(13)
Eckerd Corporation 10,909
(2017/2037)(13)
Laguna Niguel Promenade
Laguna Niguel, CA
92677-3920 (13) N/A 100% 153,000 75%(13) (13) Orchard's Supply Hardware(4) 63,811
13 Acres (2018/2033)(13)
Ralph's Grocery Company 51,028
(2018/2043)(13)
The Shops at Palos Verdes
Rolling Hills Estates, CA
90274-3664 (23) N/A 100% 380,000(23) (23) (23) (23) (23)
13 Acres
Stand Alone Retail Sites Adjacent to Company's Office and Retail Projects
- -------------------------------------------------------------------------
Wildwood Office Park
Suburban Atlanta, GA
30339-5671 1985-1993 IBM 50% 15 Acres 100% 100% N/A N/A
North Point
Suburban Atlanta, GA
30202-4885 1993 N/A 100% 24 Acres 100% 100% N/A N/A
</TABLE>
<TABLE>
<CAPTION>
Adjusted
Cost and
Adjusted
Debt
Description, Depreciation Maturity
Location and and
and Amortization Debt Interest
Zip Code (1) Balance Rate
- ------------ ------------ ------- --------
Retail Centers and Malls (Continued)
- ------------------------------------
<S> <C> <C> <C>
Greenbrier MarketCenter (Continued)
Los Altos MarketCenter
Long Beach, CA
90815-3126 $ 21,658 $ 0 N/A
$ 21,000
Abbotts Bridge Station
Suburban Atlanta, GA
30097-5793 $ 10,781 $ 0 N/A
(13)
Laguna Niguel Promenade
Laguna Niguel, CA
92677-3920 $ 9,128 $ 0 N/A
(13)
The Shops at Palos Verdes
Rolling Hills Estates, CA
90274-3664 (23) $ 0 N/A
Stand Alone Retail Sites Adjacent to Company's Office and Retail Projects
- -------------------------------------------------------------------------
Wildwood Office Park
Suburban Atlanta, GA
30339-5671 $ 8,813 $ 0 N/A
$ 7,581
North Point
Suburban Atlanta, GA
30202-4885 $ 3,742 $ 0 N/A
$ 3,666
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Percentage
Description, Year Rentable Leased Average Major
Location Development Company's Square Feet as of 1997 Major Tenants (lease Tenants'
and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable
Zip Code or Acquired Partner Interest as Noted 1998 Occupancy expiration) Sq. Feet
- ------------ ----------- ------------- ---------- ---------- ---------- --------- -------------------- --------
Medical Office
- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Presbyterian Medical Plaza
at University
Charlotte, NC
28233-3549 1997 N/A 100% 69,000 100% 37%(24) Presbyterian Health Services 63,862
1 Acre (24) Corporation (2012/2027)(26)
Meridian Mark Plaza
Atlanta, GA
30342-1613 (13) N/A 100% 159,000 66%(13) (13) Northside Hospital (4) 40,675
3 Acres (2013/2023)(13)
Scottish Rite Hospital for 22,000
Crippled Children, Inc.
(2003/2008)(13)
</TABLE>
<TABLE>
<CAPTION>
Adjusted
Cost and
Adjusted
Debt
Description, Depreciation Maturity
Location and and
and Amortization Debt Interest
Zip Code (1) Balance Rate
- ------------ ------------ ------- --------
Medical Office
- --------------
<S> <C> <C> <C>
Presbyterian Medical Plaza
at University
Charlotte, NC
28233-3549 $ 7,216 $ 0 N/A
$ 7,112
Meridian Mark Plaza
Atlanta, GA
30342-1613 $ 5,619 $ 0 N/A
(13)
</TABLE>
(1)Cost as shown in the accompanying table includes deferred leasing and
financing costs and other related assets. For each of the following
projects: 2300 and 2500 Windy Ridge Parkway, 3200 Windy Hill Road, 4100 and
4300 Wildwood Parkway, 4200 Wildwood Parkway and Wildwood Stand Alone
Retail Lease Sites, the cost shown is what the cost would be if the
venture's land cost were adjusted downward to the Company's lower basis in
the land it contributed to the venture.
(2) 1,556 square feet of this lease of 2300 Windy Ridge Parkway expires in
2001.
(3) 115,944 square feet of this lease of 3200 Windy Hill Road expires in 2001,
and the balance expires in 2006.
(4) Actual tenant or venture partner is affiliate of entity shown.
(5) See "Major Properties" - "Wildwood Office Park" where the accounting for
the 3100 Windy Hill Road Building is discussed.
(6) Green Tree Financial, Georgia-Pacific Corporation and PaineWebber have
the right to terminate their leases in 2001, 2007 and 2008, respectively,
upon payment of significant cancellation penalties.
(7) Tenant has the option to purchase the building on its lease expiration date
for a price of $33,750,000.
(8) 4200 Wildwood Parkway was completed in December 1997. A lease for 100%
of the building was signed in March 1998 whereby the tenant will begin
partial occupancy in June 1998 with 100% occupancy by April 1999.
(9) See "Major Properties" - "NationsBank Plaza," "Ten Peachtree Place,"
"Grandview II," and "101 Second Street" where the venture's preferences
and terms are discussed.
(10) See "Major Properties" - "NationsBank Plaza" where debt on NationsBank
Plaza is discussed.
(11) Maturity of the Ten Peachtree Place mortgage debt is extendible to December
31, 2008. Rate becomes floating after November 30, 2001.
(12) 100 North Point Center East and 200 North Point Center East were financed
together with one non-recourse mortgage note payable. For purposes of
this schedule the total debt has been allocated 50% to each building.
(13) Project was under construction as of December 31, 1997. Lease expiration
dates are based upon estimated commencement dates, and square footage
is estimated.
(14) 103,656 square feet of this lease of 101 Independence Center expires in
2000.
(15) Land was acquired and construction commenced on Carlyle I subsequent to
December 31, 1997. Lease expiration dates are based upon estimated
commencement dates, and square footage is estimated.
(16) Two Live Oak Center became partially operational in October 1997. Thus,
economic occupancy for Two Live Oak Center does not include a full
year of operations.
(17) In November 1997, Cousins LORET Venture, L.L.C. received a commitment
for the financing of The Pinnacle which is expected to close in March 1998
and will be drawn down as needed, with the full amount funded by December
1998. The $70 million non-recourse mortgage note payable has an interest
rate of 7.11% and a term of 12 years. (18) A portion of the Haywood Mall
parking lot (3 acres) is subject to a long-term ground lease expiring in
2017, with five 10-year renewal options.
(19) This anchor tenant owns its own space.
(20) North Point MarketCenter includes approximately 4 outparcels which are
ground leased to freestanding users.
(21) 61,000 square feet became operational in March 1997. Thus, economic
occupancy does not include a full year of operations for this 61,000 square
feet portion of Presidential MarketCenter. Includes 21,000 square feet not
yet constructed as of March 15, 1998 which were excluded from the
calculation of percentage leased and average 1997 economic occupancy.
(22) Includes 16,000 square feet not yet constructed as of March 15, 1998 which
were excluded from the calculation of percentage leased and average
1997 economic occupancy.
(23) The Shops at Palos Verdes was acquired subsequent to December 31, 1997.
This 355,000 square foot center includes existing retail space and a
parking deck. The Company plans to reposition and remerchandise the project
into an approximately 380,000 square foot open-air, high-end specialty
center.
(24) Presbyterian Medical Plaza at University is located on 1 acre which is
subject to a ground lease expiring in 2057.
(25) Presbyterian Medical Plaza at University became partially operational in
August 1997 for financial reporting purposes. Thus, economic occupancy
for Presbyterian Medical Plaza at University does not include a full year
of operations.
(26) Tenant has the option to renew 23,359 rentable square feet through 2027
of this lease of Presbyterian Medical Plaza at University, with the
option to renew the balance through 2022.
<PAGE>
Land Held for Investment and Future Development (excluding Retail Outparcels)
<TABLE>
<CAPTION>
Adjusted
Cost
Less
Developable Company's Depreciation
Land Area Joint Venture Ownership and Debt
Description, Location and Zoned Use Year Acquired (Acres)(1) Partner Interest Amortization Balances
- ----------------------------------- --------------- --------- ------------- --------- -------------- --------
<S> <C> <C> <C> <C> <C> <C>
Wildwood Office Park
Suburban Atlanta, Georgia
Office and Commercial 1971-1987 147 N/A 100% $ 7,005 $ 0
Office and Commercial 1971-1982 36 IBM 50% $ 10,075(2) $ 0
North Point Land
(Georgia Highway 400 & Haynes Bridge Road) (3)
Suburban Atlanta, Georgia
Office and Commercial - East 1970-1985 41 N/A 100% $ 1,356 $ 0
Office and Commercial - West 1970-1985 221 N/A 100% $ 4,587 $ 0
Midtown Atlanta
Office and Commercial 1984 2 N/A 100% $ 1,398 $ 0
Temco Associates
(Paulding County)
Suburban Atlanta, Georgia 1991 --(5) Temple-Inland 50% --(5) $ 0
Inc. (4)
</TABLE>
(1) Based upon management's estimates.
(2) For the portion of the Wildwood Office Park land owned by a joint venture,
the cost shown is what the cost would be if the venture's land cost were
adjusted downward to the Company's lower basis in the land it contributed
to the venture. The adjusted cost excludes building predevelopment costs of
$1,183,000.
(3) The North Point property is located both east and west of Georgia Highway
400. Currently, only the land which is located east of Georgia Highway 400
is being developed, but planning and infrastructure work has begun for
additional development on the west side property. This land surrounds North
Point Mall, a 1.3 million square foot regional mall on a 100 acre site
which the Company sold in 1988.
(4) Joint venture partner is an affiliate of the entity shown.
(5) Temco Associates has an option through March 2006, with no carrying costs,
to acquire the fee simple interest in approximately 11,300 acres in
Paulding County, Georgia (northwest of Atlanta, Georgia). The partnership
also has an option to acquire a timber rights interest only in
approximately 22,000 acres. The options may be exercised in whole or in
part over the option period. Temco Associates has engaged in certain sales
of land as to which it simultaneously exercised its purchase option. During
1996, approximately 375 acres of the option related to the fee simple
interest was exercised and simultaneously sold for gross profits of
$1,427,000. None of the option was exercised in 1995 or 1997.
<PAGE>
Major Properties
- ----------------
General
- -------
This section describes the major operating properties in which the
Company has an interest either directly or indirectly through joint venture
arrangements. A "negative investment" in a joint venture results from
distributions of capital to the Company, if any, exceeding the sum of (i) the
Company's contributions of capital and (ii) reported earnings (losses) of the
joint venture allocated to the Company. "Investment" in a joint venture means
the book value of the Company's investment in the joint venture.
Wildwood Office Park
- --------------------
Wildwood Office Park is a 289 acre Class A commercial development in
suburban Atlanta master planned by I.M. Pei, including 8 office buildings
containing 2,436,000 rentable square feet. The property is zoned for office,
institutional and commercial use. Approximately 109 acres in the park are owned
by, or committed to be contributed to, Wildwood Associates (see below),
including approximately 36 acres of land held for future development. The
Company owns 100% of the 147 acre balance of the land available for future
development.
Located in Atlanta's northwest commercial district, just north of the
Interstate 285/Interstate 75 intersection, Wildwood features convenient access
to all of Atlanta's major office, commercial and residential districts. The
Wildwood complex overlooks the Chattahoochee River and borders 1,200 acres of
national forest, thus providing an urban office facility in a forest setting.
Wildwood Associates. Wildwood Associates is a joint venture formed in
1985 between the Company and IBM. The Company and IBM each have a 50% interest
in Wildwood Associates. At December 31, 1997, the Company's investment in
Wildwood Associates and a related partnership, which included the cost of the
land the Company is committed to contribute to Wildwood Associates, was reduced
to a negative investment of approximately $12.6 million due to partnership
distributions in excess of net income made during 1997 and prior years.
Wildwood Associates owns the 3200 Windy Hill Road Building (685,000
rentable square feet), the 2300 Windy Ridge Parkway Building (634,000 rentable
square feet), the 2500 Windy Ridge Parkway Building (313,000 rentable square
feet), the 4100 and 4300 Wildwood Parkway Buildings (250,000 rentable square
feet in total) and the 4200 Wildwood Parkway Building (260,000 rentable square
feet). At March 15, 1998, these buildings were 98%, 98%, 98%, 100% and 100%
leased, respectively. Wildwood Associates also owns 15 acres leased to two
banking facilities and five restaurants.
On March 20, 1997, Wildwood Associates completed the $30 million
financing of the 4100 and 4300 Wildwood Parkway Buildings (see Note 4). In
conjunction with this financing and a portion of the $70 million financing of
the 3200 Windy Hill Road Building completed in December 1996, during the first
quarter of 1997, Wildwood Associates made non-operating cash distributions of
$12.5 million to each partner and paid the entire calendar year 1997 operating
distribution of $4.5 million to each partner.
Wildwood Associates has a $10 million bank line of credit (the Company
severally guarantees one-half) under which $0 was drawn as of December 31,1997.
Other Buildings in Wildwood Office Park. Wildwood Office Park also
contains the 3301 Windy Ridge Parkway Building, a 106,000 rentable square foot
office building located on approximately 10 acres which is wholly owned by the
Company. Commencing January 1994, a single tenant leased the building for a term
of ten years. The lease was initially for 60% of the building with options
permitting the tenant to expand its occupancy to the remainder of the building
over the next several years. The first such option for an additional 10% of the
space was exercised in the fourth quarter of 1994, the second option for another
10% of the space was exercised effective December 15, 1996, and the remainder of
the option was exercised during 1997, bringing the building to 100% leased as of
March 15, 1998.
In addition, the 3100 Windy Hill Road Building, a 188,000 rentable
square foot corporate training facility occupies a 13-acre parcel of land which
is wholly owned by the Company. The training facility improvements were sold in
1983 to a limited partnership of private investors, at which time the Company
received a leasehold mortgage note. The training facility land was
simultaneously leased to the partnership for thirty years, along with certain
equipment for varying periods. The training facility had been leased by the
partnership to IBM through November 30, 1998.
Effective January 1, 1997, the IBM lease was extended eight years
beyond its previous expiration, to November 30, 2006. Based on the economics of
the lease which are discussed in Note 3, the Company will receive substantially
all of the economic risks and rewards from the property through the term of the
IBM lease. In addition, the Company will receive substantially all of the future
economic risks and rewards from the property beyond the IBM lease because of the
short term remaining on the land lease (7 years) and the large mortgage note
balance ($25.9 million) that would have to be paid off, with interest, in that 7
year period before the limited partnership would receive any significant
benefit. Therefore, effective January 1, 1997, the $17,005,000 balance of the
mortgage note and land was reclassified to Operating Properties, and 1997
revenues and expenses (including depreciation) have been recorded as if the
building were owned by the Company.
North Point
- -----------
North Point is a mixed-use commercial development located in north
central suburban Atlanta, Georgia off of Georgia Highway 400, a six lane state
highway that runs from downtown Atlanta to the northern Atlanta suburbs. The
Company owns approximately 152 and 221 acres located on the east and west sides
of Georgia Highway 400, respectively. Currently, only the land which is located
east of Georgia Highway 400 is being developed, but planning and infrastructure
work has begun for additional development on the west side property. This land
surrounds North Point Mall, a 1.3 million square foot regional mall on a 100
acre site which the Company sold in 1988. The following describes the various
components of North Point.
North Point MarketCenter and Mansell Crossing Phase II. North Point
MarketCenter, which is 100% leased as of March 15, 1998, is a 514,000 square
foot retail power center (of which 398,000 square feet are owned by Cousins)
located adjacent to North Point Mall. Mansell Crossing Phase II, which is 100%
leased as of March 15, 1998, is an approximately 103,000 square foot expansion
of an existing retail power center, previously developed by the Company for a
third party. These two centers are located on 49 (Company owned) and 13 acres of
land, respectively, at North Point.
North Point Center East. The Company owns three office buildings
located adjacent to North Point Mall and the Company's retail properties. 100
North Point Center East and 200 North Point Center East, which were completed in
1995 and 1996, are 128,000 and 129,000 rentable square feet, respectively.
Construction commenced in December 1996 on the third office building, 333 North
Point Center East, a 129,000 square foot office building, adjacent to 100 and
200 North Point Center East. These three office buildings are located on 25
acres of land at North Point and are 100%, 100% and 41% leased, respectively, as
of March 15, 1998.
Other North Point Property. Approximately 24 acres of the North Point
land are ground leased in 1 to 5 acre sites to freestanding users. These 24
acres were 100% leased as of March 15, 1998.
The remaining approximately 262 developable acres at North Point are
100% owned by the Company. Approximately 41 acres of this land are located on
the east side of Georgia Highway 400 and are zoned for mixed-use development
including retail and office space. Approximately 221 acres of the land are
located on the west side of Georgia Highway 400 and are zoned for office,
institutional and light industrial use.
Other Office Properties
- -----------------------
NationsBank Plaza. NationsBank Plaza is a Class A, 55-story, 1.3
million rentable square foot office tower designed by Kevin Roche and is located
on approximately 4 acres of land between the midtown and downtown districts of
Atlanta, Georgia. The building, which was completed in 1992, was approximately
95% leased as of March 15, 1998. An affiliate of NationsBank leases 46% of the
rentable square feet. NationsBank Plaza was developed by CSC, a joint venture
formed by the Company and a wholly owned subsidiary of NationsBank, each as 50%
partners.
CSC's net income or loss and cash distributions are allocated to the
partners based on their percentage interests (50% each). At December 31, 1997,
the Company's investment in CSC was approximately $99,513,000.
Cousins LORET Venture, L.L.C. Effective July 31, 1997, Cousins LORET
Venture, L.L.C. ("the Venture") was formed between the Company and LORET
Holdings, L.L.L.P. ("LORET"), each as 50% members. LORET contributed Two Live
Oak Center, a 278,000 rentable square foot office building located in Atlanta,
Georgia, which was recently renovated and is in the process of being leased up.
Two Live Oak Center became partially operational for financial reporting
purposes in October 1997 and was 88% leased as of March 15, 1998. LORET also
contributed an adjacent 4 acre site on which construction commenced in August
1997 on The Pinnacle, a 424,000 rentable square foot office building which was
33% leased as of March 15, 1998. Two Live Oak Center was contributed subject to
a 7.90% $30 million non-recourse ten year mortgage note payable (see Note 4).
The Company is obligated to contribute $25 million of cash to the Venture to
match the value of LORET's agreed-upon equity, which cash is to be contributed
as needed for the development of The Pinnacle. As of December 31, 1997, the
Company had contributed $8.5 million of its $25 million obligation. The Pinnacle
is expected to be completed at the end of 1998 at a cost of approximately $86
million.
In November 1997, Cousins LORET Venture, L.L.C. received a commitment
for the financing of The Pinnacle office building which is expected to close in
the second quarter of 1998 and will be drawn down as needed with the full amount
funded by December 1998. The $70 million non-recourse mortgage note payable has
an interest rate of 7.11% and term of twelve years.
First Union Tower. First Union Tower is a Class A office building
containing approximately 319,000 rentable square feet. The property is located
on approximately one acre of land in downtown Greensboro, North Carolina. First
Union Tower opened in the first quarter of 1990 and as of March 15, 1998 was
approximately 93% leased.
615 Peachtree Street. In August 1996, the Company acquired 615
Peachtree Street, a 147,000 rentable square foot 12-story downtown Atlanta
office building, located across from NationsBank Plaza. 615 Peachtree Street was
73% leased as of March 15, 1998.
101 Independence Center. In December 1996, the Company acquired 101
Independence Center, a 522,000 rentable square foot office building (including
an underground parking garage and an adjacent parking deck) located at the
intersection of Trade and Tryon in the central business district of Charlotte,
North Carolina. 101 Independence Center was 93% leased as of March 15, 1998.
One Ninety One Peachtree Tower. One Ninety One Peachtree Tower is a
50-story, Class A office tower located in downtown Atlanta, Georgia that was
completed in December 1990. One Ninety One Peachtree Tower, which contains 1.2
million rentable square feet, was designed by John Burgee Architects, with
Phillip Johnson as design consultant.
One Ninety One Peachtree Tower was developed on approximately 2 acres
of land, of which approximately 1.5 acres is owned and approximately one-half
acre under the parking facility is leased for a 99-year term expiring in 2087
with a 99-year renewal option. One Ninety One Peachtree Tower was approximately
93% leased at March 15, 1998.
C-H Associates, Ltd. ("C-H Associates"), a partnership formed in 1988
between CREC (49%), Hines Peachtree Associates Limited Partnership (49%) and
Peachtree Palace Hotel, Ltd. (2%), owns a 20% interest in the partnership that
owns One Ninety One Peachtree Tower. C-H Associates' 20% ownership of One Ninety
One Peachtree Tower results in an effective 9.8% ownership interest by CREC,
subject to a preference in favor of the majority partner, in the One Ninety One
Peachtree Tower project. The balance of the One Ninety One Peachtree Tower
project is owned by DIHC Peachtree Associates, which was an affiliate of Dutch
Institutional Holding Company, but was acquired by Cornerstone Properties, Inc.
in October 1997.
Through C-H Associates, CREC received 50% of the development fees from
the One Ninety One Peachtree Tower project. In addition, CREC owns a 50%
interest in two general partnerships which receive fees from leasing and
managing the One Ninety One Peachtree Tower project.
The One Ninety One Peachtree Tower project was funded substantially by
debt until March 1993, at which time DIHC Peachtree Associates contributed
equity in the amount of $145,000,000 which repaid approximately one-half of the
debt. Subsequent to the equity contribution, C-H Associates is entitled to a
priority distribution of $250,000 per year (of which the Company is entitled to
receive $112,500) for seven years beginning in 1993. The equity contributed by
DIHC Peachtree Associates is entitled to a preferred return at a rate increasing
over the first 14 years from 5.5% to 11.5% (payable after the Company's priority
return); at December 31, 1997, the cumulative undistributed preferred return was
$15,281,555. After DIHC Peachtree Associates recovers its preferred return, the
partners share in any operating cash flow distributions in accordance with their
percentage interests. The project is subject to long-term debt of $145,000,000
at December 31, 1997. At December 31, 1997, the Company had a negative
investment of $90,000 in the One Ninety One Peachtree Tower project.
Ten Peachtree Place. Ten Peachtree Place is a 20-story, 259,000
rentable square foot Class A office building located in midtown Atlanta,
Georgia. Completed in 1991, this structure was designed by Michael Graves and is
currently 100% leased to Coca-Cola. Approximately four acres of adjacent land,
currently used for surface parking, are available for future development.
Ten Peachtree Place is owned by Ten Peachtree Place Associates, a
general partnership between the Company (50%) and a wholly owned subsidiary of
Coca-Cola (50%). The partnership acquired the property in 1991 for a nominal
cash investment, subject to a ten-year purchase money note. This 8% purchase
money note had an outstanding balance of $19.4 million at December 31, 1997. If
the purchase money note is paid in accordance with its terms, it will amortize
to approximately $15.3 million ($59 per rentable square foot) over the ten-year
term of the Coca-Cola lease, at which time Coca-Cola is entitled to receive the
preferred return described below, and the property may be sold, released, or
returned to the lender under the purchase money note for $1.00 without penalty
or any further liability to the Company for the indebtedness. At December 31,
1997, the Company had an investment in Ten Peachtree Place Associates of
$44,000.
The Company anticipates that Ten Peachtree Place Associates will
generate approximately $400,000 per year of cash flows from operating activities
net of note principal amortization during the ten-year lease. The partnership
agreement generally provides that each of the partners is entitled to receive
50% of cash flows from operating activities net of note principal amortization
(excluding any sale proceeds) for ten years, after which time the Company is
entitled to 15% of cash flows (including any sale proceeds) and its partner is
entitled to receive 85% of cash flows (including any sale proceeds), until the
two partners have received a combined distribution of $15.3 million, after which
time each partner is entitled to receive 50% of cash flows (including any sale
proceeds).
CC-JM II Associates. This joint venture was formed in 1994 between the
Company and an affiliate of CarrAmerica Realty Corporation, each as 50% general
partners, to develop and own a 224,000 square foot office building in suburban
Washington, D.C. The building is 100% leased for 15 years to Booz-Allen &
Hamilton, an international consulting firm, as a part of its corporate
headquarters campus. Rent commenced on January 21, 1996.
Office Properties Under Development
- -----------------------------------
Grandview II. Cousins/Daniel, LLC was formed in 1997 between Cousins,
Inc. (a wholly owned subsidiary of Cousins) and Daniel Realty Company
("Daniel"). The purpose of this venture is to develop certain projects proposed
by Daniel and selected by Cousins. Daniel's economic rights are limited to
development fees, leasing fees, management fees and certain incentive interests.
These incentive interests include a residual interest in the cash flow and a
residual interest in capital proceeds. All projects undertaken within the
venture are pooled for purposes of calculating the aforementioned residuals.
This venture is treated as a consolidated entity in the Company's financial
statements.
In April 1997, Cousins/Daniel, LLC purchased the land on which
construction commenced on Grandview II, the first project developed and owned by
Cousins/Daniel, LLC which is a 150,000 rentable square foot office building in
Birmingham, Alabama. Grandview II is expected to be completed during the second
quarter of 1998 at a cost of approximately $18 million and was 64% leased as of
March 15, 1998.
101 Second Street. Cousins/Myers Second Street Partners, L.L.C., a
venture formed in 1997 between Cousins and Myers Second Street Company LLC
("Myers"), purchased .63 acres of undeveloped land in downtown San Francisco,
California which is entitled for 101 Second Street, an approximately 381,000
rentable square foot office building. The venture is currently pursing
predevelopment and investigative work to confirm the feasibility of developing
this office building.
Pursuant to the Operating Agreement, Cousins funded substantially all
of the purchase price of the land through its initial capital contribution of
$11,101,500. Myers' initial capital contribution was $603,304 which included
$500,000 of earnest money toward the purchase of the land. Cousins and Myers are
each obligated to fund additional capital contributions of $450,000. Thereafter,
Cousins is obligated to fund 30% of the total budgeted costs of the project,
with the remaining 70% obtained either from Cousins, if it so elects, or with
project financing. Myers' economic rights are limited to development fees and
certain incentive interests, which include a residual interest in the cash flow
and a residual interest in capital proceeds. This venture is treated as a
consolidated entity in the Company's financial statements.
Carlyle I. Subsequent to year-end, in January 1998, the Company
purchased the land for, and commenced construction on Carlyle I, an
approximately 150,000 rentable square foot office building in Alexandria,
Virginia. Carlyle I is expected to be completed during the second quarter of
1999 at a cost of approximately $30 million and was 58% leased as of March 15,
1998.
Other Retail Properties
- -----------------------
Haywood Mall. Haywood Mall is an enclosed regional shopping center
located 5 miles southeast of downtown Greenville, South Carolina, which was
developed and opened in 1980, and is owned by the Company and Bellwether
Properties of South Carolina, L.P. ("Bellwether"), an affiliate of Corporate
Properties Investors. The mall has 1,256,000 gross leaseable square feet ("GLA")
of which approximately 330,000 GLA is owned. The balance of the mall is owned by
the mall's five major department stores. The portion of Haywood Mall owned by
the Company and Bellwether was developed on approximately 21 acres of land, of
which approximately 18 acres is owned and approximately 3 acres (of parking
area) is leased under a ground lease expiring in 2017, with five 10-year renewal
options. The portion of Haywood Mall owned by the Company and Bellwether was
approximately 84% leased as of March 15, 1998.
The Company has a 50% interest in Haywood Mall. At December 31, 1997,
the Company's investment was $20,626,000.
Other Fully Operational Retail Properties. In addition to the
aforementioned North Point MarketCenter and Mansell Crossing Phase II, the
Company owns five other retail centers which were fully operational for
financial reporting purposes as of December 31, 1997. Perimeter Expo is a
291,000 square foot retail power center (of which the Company owns 171,000
square feet) which is located in Atlanta, Georgia and was 99% leased (Company
owned) as of March 15, 1998. Presidential MarketCenter is a 478,000 square foot
retail power center (of which the Company owns 361,000 square feet) which is
located in suburban Atlanta, Georgia and was 99% leased (Company owned) as of
March 15, 1998. Greenbrier MarketCenter is a 478,000 square foot retail power
center which is located in Chesapeake, Virginia and was 100% leased as of March
15, 1998. Colonial Plaza MarketCenter is a 493,000 square foot retail power
center which is located in Orlando, Florida and was 91% leased as of March 15,
1998. Los Altos MarketCenter is a 258,000 square foot retail power center (of
which the Company owns 157,000 square feet) which is located in Long Beach,
California and was 100% leased as of March 15, 1998.
Retail Properties Under Development. The Company owns two retail
centers which were under construction as of December 31, 1997. Abbotts Bridge
Station, an 83,000 square foot neighborhood retail center which is located in
suburban Atlanta, was completed in early 1998 and was 95% leased as of March 15,
1998. In August 1997, the Company purchased the land for and commenced
construction on Laguna Niguel Promenade, an approximately 153,000 square foot
retail center in Laguna Niguel, California and is expected to be completed in
mid 1998 at a total cost of approximately $19.5 million. Laguna Niguel Promenade
was 75% leased as of March 15, 1998.
Subsequent to year-end, in February 1998, the Company purchased The
Shops at Palos Verdes, located in Rolling Hills Estates, California, in the
greater Los Angeles metropolitan area. This 355,000 square foot center includes
existing retail space and a parking deck. The Company plans to reposition and
remerchandise the project into an approximately 380,000 square foot open-air,
high-end specialty center.
Retail Properties Sold. On July 1, 1997, CREC sold Rivermont Station
and Lovejoy Station, two Atlanta neighborhood retail centers with 90,000 and
77,000 square feet, respectively, for $20.1 million, which was approximately
$4.0 million over the cost of the centers. Including depreciation recapture of
approximately $.5 million and net of an income tax provision of approximately
$1.5 million, the net gain on the sale was approximately $3.0 million.
Medical Office Properties
- -------------------------
In August 1997, Presbyterian Medical Plaza at University, a 69,000
rentable square foot medical office building located in Charlotte, North
Carolina, became partially operational for financial reporting purposes and was
100% leased as of March 15, 1998. In September 1997, the Company commenced
construction on Meridian Mark Plaza, a 159,000 rentable square foot medical
office building located in Atlanta, Georgia. Meridian Mark Plaza is expected to
be completed during the third quarter of 1998 at a total cost of approximately
$27 million and was 66% leased as of March 15, 1998.
Residential Lots Under Development
- -----------------------------------
As of December 31, 1997, CREC owned the following parcels of land which
are being developed into residential communities ($ in thousands):
<TABLE>
<CAPTION>
Estimated
Total Lots Purchase
Initial on Land Money
Year Currently Lots Remaining Carrying Debt
Description Acquired Owned (1) Sold to Date Lots Value Balances
----------- -------- --------- -------------------------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Brown's Farm 1993 219 133 86 $ 2,426 $ 0
West Cobb County
Suburban Atlanta, GA
Apalachee River Club 1994 186 90 96 2,974 0
Gwinnett County
Suburban Atlanta, GA
Echo Mill 1994 543 197 346 4,585 0
West Cobb County
Suburban Atlanta, GA
Barrett Downs 1994 145 77 68 1,603 0
Forsyth County
Suburban Atlanta, GA
Bradshaw Farm 1994 512 252 260 2,322 0
Cherokee County
Suburban Atlanta, GA
Alcovy Woods
Gwinnett County
Suburban Atlanta, GA 1996 121 37 84 1,032 568
----- --- --- ------- ------
Total 1,726 786 940 $14,942 $ 568
===== === === ======= ======
</TABLE>
(1) Includes lots sold to date. Additional lots may be developed on
adjacent land on which CREC holds purchase options.
Land Held for Investment and Future Development
- -----------------------------------------------
In addition to the various land parcels located adjacent to operating
properties or projects under construction discussed above, the Company owns the
following significant land holdings either directly or indirectly through joint
venture arrangements. The Company intends to convert its land holdings to
income-producing usage or to sell portions of land holdings as opportunities
present themselves over time.
Temco Associates. Temco Associates was formed in March 1991 as a
partnership between CREC (50%) and a subsidiary of Temple-Inland Inc. (50%).
Temco Associates has an option through March 2006, with no carrying costs, to
acquire the fee simple interest in approximately 11,300 acres in Paulding
County, Georgia (northwest of Atlanta, Georgia). The partnership also has an
option to acquire a timber rights interest only in approximately 22,000 acres.
The options may be exercised in whole or in part over the option period and the
option price of the fee simple land was $827 per acre at January 1, 1998,
escalating at 6% on January 1 of each succeeding year during the term of the
option. The Temco Associates property has the potential for future residential,
industrial and commercial development. Temco Associates has to date sold parcels
of land as to which it simultaneously exercised its purchase option. During
1996, approximately 375 acres of the option related to the fee simple interest
was exercised and simultaneously sold for gross profits of $1,427,000.
None of the option was exercised in 1995 or 1997.
Other Real Property Investments
- -------------------------------
Omni Norfolk Hotel. Norfolk Hotel Associates ("NHA") was a general
partnership formed in 1978 between the Company and an affiliate of Odyssey
Partners, L.P. (an investment partnership), each as 50% partners, which held a
mortgage note on and owned the land under the 442-room Omni International Hotel
in downtown Norfolk, Virginia. In January 1992, NHA terminated the land lease
and became the owner of the hotel and a long-term parking agreement with an
adjacent building owner. In April 1993, the partnership sold the hotel, but
retained its interest in the parking agreement. The partnership received a
$8,325,000 mortgage note for a portion of the sales proceeds. In July 1994, NHA
distributed to each partner a 50% interest in the parking agreement held by NHA,
and in July 1996 the Company sold its 50% interest for $2 million, resulting in
a profit to the Company of approximately $408,000 which is included in Gain on
Sale of Investment Properties in the 1996 Consolidated Statement of Income.
On February 14, 1997, the mortgage note receivable due to NHA with a
balance of $8,325,000 was repaid in full. A portion of the proceeds from the
repayment was used to pay off the partnership's lines of credit, with the
balance of the partnership's assets ($2.2 million of cash for each partner)
distributed to the partners in 1997. The partnership was dissolved in 1997.
Dusseldorf Joint Venture. In 1992, Cousins entered into a joint venture
agreement for the development of a 133,000 rentable square foot office building
in Dusseldorf, Germany which is 34% leased to IBM. Cousins' venture partners are
IBM and Multi Development Corporation International B.V. ("Multi"), a Dutch real
estate development company. In December 1993, the building was presold to an
affiliate of Deutsche Bank. CREC and Multi jointly developed the building. Due
to the release of certain completion guarantees related to the building,
approximately $2.6 million of development income was recognized in September
1995 ($931,000 of which had been deferred as of December 31, 1994). An
additional $235,000 and $777,000 of development income was received and
recognized in 1997 and 1996, respectively.
Kennesaw Crossings. The Company owns Kennesaw Crossings, a 116,000
square foot shopping center in suburban Atlanta, Georgia. The center was
constructed in 1974 on 14 acres of land leased from an unrelated party through
2068. The Company's net carrying value in Kennesaw Crossings as of December 31,
1997 was $908,000.
Air Rights Near the CNN Center. The Company owns a leasehold interest
in the air rights over the approximately 365,000 square foot CNN Center parking
facility in Atlanta, Georgia, adjoining the headquarters of Turner Broadcasting
System, Inc. and Cable News Network. The air rights are developable for
additional parking or office use. The Company's net carrying value of this
property is $0.
<PAGE>
Supplemental Financial and Leasing Information
- ----------------------------------------------
Depreciation and amortization expense include the following components
for the years ended December 31, 1997 and 1996 ($ in thousands):
<TABLE>
<CAPTION>
1997 1996
------------------------------------- --------------------------------------
Share of Share of
Unconsolidated Unconsolidated
Consolidated Joint Ventures Total Consolidated Joint Ventures Total
------------ -------------- ----- ------------ -------------- -----
<S> <C> <C> <C> <C> <C> <C>
Furniture, fixtures and
equipment $ 435 $ 7 $ 442 $ 306 $ 40 $ 346
Deferred financing costs -- 10 10 -- 16 16
Goodwill and related business
acquisition costs 486 35 521 363 44 407
Real estate related:
Building (including tenant
first generation) 12,351 9,056 21,407 6,336 8,958 15,294
Tenant second generation 774 1,243 2,017 214 979 1,193
-------- -------- ------- ------ -------- -------
$ 14,046 $ 10,351 $24,397 $7,219 $ 10,037 $17,256
======== ======== ======= ====== ======== =======
</TABLE>
Exclusive of new developments and purchases of furniture, fixtures and
equipment, the Company had the following capital expenditures for the years
ended December 31, 1997 and 1996, including its share of unconsolidated joint
ventures ($ in thousands):
<TABLE>
<CAPTION>
1997 1996
------------------------------ --------------------------------
Office Retail Total Office Retail Total
------ ------ ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
Second generation related costs $ 978 $ -- $ 978 $1,892 $ -- $1,892
Building improvements 14 -- 14 3 -- 3
------ ----- ------ ------ ----- ------
Total $ 992 $ -- $ 992 $1,895 $ -- $1,895
====== ===== ====== ====== ===== ======
</TABLE>
<PAGE>
Item 3. Legal Proceedings
- -----------------------------------
No material legal proceedings are presently pending by or against the
Company.
Item 4. Submission of Matters to a Vote of Security Holders
- ---------------------------------------------------------------
No matter was submitted to a vote of security holders during the fourth
quarter of the Registrant's fiscal year ended December 31, 1997.
Item X. Executive Officers of the Registrant
The Executive Officers of the Registrant as of the date hereof are as
follows:
<TABLE>
<CAPTION>
Name Age Office Held
---- --- -----------
<S> <C> <C>
Thomas G. Cousins 66 Chairman of the Board of Directors
and Chief Executive Officer
Daniel M. DuPree 51 President and Chief Operating Officer
Kelly H. Barrett 33 Senior Vice President - Finance
George J. Berry 60 Senior Vice President
Tom G. Charlesworth 48 Senior Vice President, Secretary and
General Counsel
Craig B. Jones 47 Senior Vice President
Joel T. Murphy 39 Senior Vice President and President
of the Retail Division (Cousins
MarketCenters, Inc.)
John L. Murphy 52 Senior Vice President
W. James Overton 51 Senior Vice President - Development
Lea Richmond III 50 Senior Vice President and President
of the Medical Office Division
(Cousins/Richmond)
Peter A. Tartikoff 56 Senior Vice President and Chief
Financial Officer
</TABLE>
Relationships:
- --------------
There are no family relationships among the Executive Officers or
Directors.
Term of Office:
- ---------------
The term of office for all officers expires at the annual directors'
meeting, but the Board has the power to remove any officer at any time. Business
Experience:
Mr. Cousins has been the Chief Executive Officer of the Company since its
inception.
Mr. DuPree joined the Company in October 1992, became Senior Vice President
in April 1993, Senior Executive Vice President in April 1995 and President and
Chief Operating Officer in November 1995. Prior to that he was President of New
Market Companies, Inc. and affiliates since 1984.
Ms. Barrett joined the Company in October 1992 as Vice President and
Controller and became Senior Vice President - Finance of the Company in August
1997. Prior to that she was employed by Arthur Andersen LLP as an Audit Manager.
Mr. Berry has been Senior Vice President since joining the Company in
September 1990. Prior to that he was Commissioner of the State of Georgia's
Department of Industry, Trade and Tourism from 1983 to 1990.
Mr. Charlesworth joined the Company in October 1992 and became Senior Vice
President, Secretary and General Counsel in November 1992. Prior to that he
worked for certain affiliates of Thomas G. Cousins as Chief Financial Officer
and Legal Counsel.
Mr. Jones joined the Company in October 1992 and became Senior Vice
President in November 1995. From 1987 until joining the Company, he was
Executive Vice President of New Market Companies, Inc. and affiliates.
Mr. Joel Murphy joined the Company in October 1992 and became Senior Vice
President of the Company and President of the Retail Division in November 1995.
From 1988 until joining the Company, he was Senior Vice President of New Market
Companies, Inc. and affiliates.
Mr. John Murphy has been Senior Vice President since joining the Company in
December 1987.
Mr. Overton has been Senior Vice President since joining the Company in
September 1989. Prior to that he was employed by Hardin Construction Group, Inc.
from 1972 to 1989, where he served as President from 1985 to 1989.
Mr. Richmond has been Senior Vice President and President of the Medical
Office Division since he joined the Company in July 1996. Prior to that he was
President of The Lea Richmond Company and The Richmond Development Company from
1975 to 1996.
Mr. Tartikoff has been Senior Vice President and Chief Financial Officer of
the Company since February 1986.
<PAGE>
PART II
-------
Item 5. Market for Registrant's Common Stock and Related Security Holder Matters
- --------------------------------------------------------------------------------
The information concerning the market prices for the Registrant's common
stock and related stockholder matters appearing under the caption "Market and
Dividend Information" on page 47 of the Registrant's 1997 Annual Report to
Stockholders is incorporated herein by reference.
Item 6. Selected Financial Data
- --------------------------------
The information appearing under the caption "Five Year Summary of Selected
Financial Data" on page 39 of the Registrant's 1997 Annual Report to
Stockholders is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations
---------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations which appears on pages 40 through 46 of the Registrant's 1997 Annual
Report to Stockholders is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
The Consolidated Financial Statements and Notes to Consolidated Financial
Statements of the Registrant and Report of Independent Public Accountants which
appear on pages 21 through 39 of the Registrant's 1997 Annual Report to
Stockholders are incorporated herein by reference.
The information appearing under the caption "Selected Quarterly Financial
Information (Unaudited)" on page 48 of the Registrant's 1997 Annual Report to
Stockholders is incorporated herein by reference.
Other financial statements and financial statement schedules required under
Regulation S-X are filed pursuant to Item 14 of Part IV of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- -------------------------------------------------------------------------------
Financial Disclosure
--------------------
Not applicable.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
- --------------------------------------------------------------
The information concerning the Directors and Executive Officers of the
Registrant that is required by this Item 10, except that which is presented in
Item X in Part I above, is included under the captions "Directors and Executive
Officers of the Company" on pages 2 through 5 and "Compliance with Section 16(a)
of the Securities Exchange Act of 1934" on page 13 of the Proxy Statement dated
March 27, 1998 relating to the 1997 Annual Meeting of the Registrant's
Stockholders, and is incorporated herein by reference.
Item 11. Executive Compensation
- ----------------------------------
The information appearing under the caption "Executive Compensation" on
pages 7 through 9 and "Compensation of Directors" on page 13 of the Proxy
Statement dated March 27, 1998 relating to the 1997 Annual Meeting of the
Registrant's Stockholders is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- --------------------------------------------------------------------------
The information concerning security ownership of certain beneficial owners
and management required by this Item 12 is included under the captions
"Directors and Executive Officers of the Company" on pages 2 through 6 and
"Principal Stockholders" on pages 23 and 24 of the Proxy Statement dated March
27, 1998 relating to the 1997 Annual Meeting of the Registrant's Stockholders,
and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
- ----------------------------------------------------------
The information concerning certain transactions required by this Item
13 is included under the caption "Certain Transactions" on pages 13 and 14 of
the Proxy Statement dated March 27, 1998 relating to the 1997 Annual Meeting of
the Registrant's Stockholders, and is incorporated herein by reference.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
- ----------------------------------------------------------------------------
(a) 1. Financial Statements
--------------------------
A. The following Consolidated Financial Statements of the
Registrant, together with the applicable Report of
Independent Public Accountants, are contained on pages 21
through 39 of the Registrant's 1997 Annual Report to
Stockholders and are incorporated herein by reference:
<TABLE>
<CAPTION>
Page Number
in Annual Report
----------------
<S> <C>
Consolidated Balance Sheets - December 31, 1997
and 1996 21
Consolidated Statements of Income for the Years Ended
December 31, 1997, 1996 and 1995 22
Consolidated Statements of Stockholders' Investment for the
Years Ended December 31, 1997, 1996 and 1995 23
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995 24
Notes to Consolidated Financial Statements
December 31, 1997, 1996 and 1995 25
Report of Independent Public Accountants 39
</TABLE>
B. The following Combined Financial Statements, together with
the applicable Report of Independent Public Accountants, of
Wildwood Associates and Green Valley Associates II, joint
ventures of the Registrant meeting the criteria for
significant subsidiaries under the rules and regulations of
the Securities and Exchange Commission, are filed as a part
of this report.
<TABLE>
<CAPTION>
Page Number
in Form l0-K
------------
<S> <C>
Report of Independent Public Accountants F-1
Combined Balance Sheets - December 31, 1997 and 1996 F-2
Combined Statements of Income for the Years
Ended December 31, 1997, 1996 and 1995 F-3
Combined Statements of Partners' Capital for the Years
Ended December 31, 1997, 1996 and 1995 F-4
Combined Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995 F-5
Notes to Combined Financial Statements
December 31, 1997, 1996 and 1995 F-6 through
F-11
</TABLE>
<PAGE>
Item 14. Continued
- ---------------------
C. The following Financial Statements, together with the
applicable Report of Independent Auditors, of CSC
Associates, L.P., a joint venture of the Registrant meeting
the criteria for a significant subsidiary under the rules
and regulations of the Securities and Exchange Commission,
are filed as a part of this report.
<TABLE>
<CAPTION>
Page Number
in Form l0-K
------------
<S> <C>
Report of Independent Auditors G-1
Balance Sheets - December 31, 1997 and 1996 G-2
Statements of Operations for the Years Ended
December 31, 1997, 1996 and 1995 G-3
Statements of Partners' Capital for the Years Ended
December 31, 1997, 1996 and 1995 G-4
Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995 G-5
Notes to Financial Statements G-6 through
December 31, 1997, 1996 and 1995 G-9
</TABLE>
<PAGE>
2. Financial Statement Schedules
-----------------------------------
The following financial statement schedules, together with the
applicable report of independent public accountants are filed as a
part of this report.
<TABLE>
<CAPTION>
Page Number
in Form l0-K
------------
<S> <C> <C>
A. Cousins Properties Incorporated and Consolidated Entities:
Report of Independent Public Accountants on Schedule S-7
Schedule III- Real Estate and Accumulated
Depreciation - December 31, 1997 S-8 through
S-12
B. Wildwood Associates and Green Valley Associates II
Schedule III - Real Estate and Accumulated
Depreciation - December 31, 1997 F-12
C. CSC Associates, L.P.
Schedule III- Real Estate and Accumulated
Depreciation - December 31, 1997 G-10
</TABLE>
NOTE: Other schedules are omitted because of the absence of conditions
under which they are required or because the required information
is given in the financial statements or notes thereto.
<PAGE>
Item 14. Continued
- ---------------------
3. Exhibits
--------------
3(a)(i) Articles of Incorporation of Registrant, as
approved by the Stockholders on April 29, 1997,
filed as Exhibit B to the Registrant's Proxy
Statement dated April 29, 1997, and incorporated
herein by reference.
3(b) By-laws of Registrant, as approved by the
Stockholders on April 30, 1990, and as further
amended by the Stockholders on April 29, 1993,
filed as Exhibit 4(b) to the Registrant's Form S-3
dated September 28, 1993, and incorporated herein
by reference.
4(a) Dividend Reinvestment Plan as restated as of March
27, 1995, filed in the Registrant's Form S-3 dated
March 27, 1995, and incorporated herein by
reference.
10(a)(i) Cousins Properties Incorporated 1989 Stock Option
Plan, as renamed the 1995 Stock Incentive Plan and
approved by the Stockholders on May 6, 1996, filed
as Exhibit A to the Registrant's Proxy Statement
dated May 6, 1996, and incorporated herein by
reference.
10(a)(ii) Cousins Real Estate Corporation Stock Appreciation
Right Plan, amended and restated as of March 15,
1993, filed as Exhibit 10(a)(ii) to the
Registrant's Form 10-K for the year ended December
31, 1992, and incorporated herein by reference.
10(a)(iii) Cousins Properties Incorporated Stock Appreciation
Right Plan, dated as of March 15, 1993, filed as
Exhibit 10(a)(iii) to the Registrant's Form 10-K
for the year ended December 31, 1992, and
incorporated herein by reference.
10(b)(i) Cousins Properties Incorporated Profit Sharing Plan
as amended and restated effective as of January 1,
1996.
10(b)(ii) Cousins Properties Incorporated Profit Sharing
Trust Agreement as effective as of January 1, 1991,
filed as Exhibit 10(b)(ii) to the Registrant's Form
10-K for the year ended December 31, 1991, and
incorporated herein by reference.
10(c) Land lease (Kennesaw) dated December 17, 1969, and
an amendment thereto dated December 15, 1977, filed
as Exhibit l0(d) to the Registrant's Form 10-K for
the year ended December 31, 1980, and incorporated
herein by reference.
10(d) Cousins Properties Incorporated Stock Plan for
Outside Directors, as approved by the Stockholders
on April 29, 1997, filed as Exhibit B to the
Registrant's Proxy Statement dated April 29, 1997,
and incorporated herein by reference.
11 Schedule showing computation of net income per
share for each of the five years ended December 31,
1997.
13 Annual Report to Stockholders for the year ended
December 31, 1997.
21 Subsidiaries of the Registrant.
23(a) Consent of Independent Public Accountants (Arthur
Andersen LLP).
23(b) Consent of Independent Auditors
(Ernst & Young LLP).
27 Financial Data Schedule.
(b) Reports on Form 8-K.
--------------------------
On December 12, 1997, the Registrant filed a current report on
Form 8-K to file the Underwriting Agreement, dated December 10,
1997, among the Registrant and the Underwriters named therein.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Cousins Properties Incorporated
(Registrant)
Dated: March 20, 1998
BY: /s/ Kelly H. Barret
-------------------------------------
Kelly H. Barrett
Senior Vice President - Finance
(Authorized Officer)
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Signature Capacity Date
- --------- -------- ----
Principal Executive Officer:
Chairman of the Board, March 20, 1998
Chief Executive Officer
/s/ T.G. Cousins and Director
- ----------------------------
T. G. Cousins
Principal Financial Officer:
Senior Vice President and March 20, 1998
/s/ Peter A. Tartikoff Chief Financial Officer
- ----------------------------
Peter A. Tartikoff
Additional Directors:
/s/ Richard W. Courts Director March 20, 1998
- ----------------------------
Richard W. Courts, II
/s/ Boone A. Knox Director March 20, 1998
- ----------------------------
Boone A. Knox
/s/ William Porter Payne Director March 20, 1998
- ----------------------------
William Porter Payne
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To the Stockholders of Cousins Properties Incorporated:
We have audited in accordance with generally accepted auditing
standards, the financial statements included in the Cousins Properties
Incorporated annual report to stockholders incorporated by reference in this
Form l0-K, and have issued our report thereon dated February 16, 1998. Our audit
was made for the purpose of forming an opinion on those statements taken as a
whole. The schedule listed in Item 14, Part (a)2.A. is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 16, 1998
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE III
(Page 1 of 5)
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
($ in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Costs Capitalized Gross Amount at Which
Initial Cost Subsequent Carried at
to Company to Acquisition December 31, 1997
------------ ----------------- -----------------------------------
Carrying
Costs
Buildings Less Cost Land Buildings
and Improve- of Sales and Land and Total
Description Encumbrances Land Improvements ments and Other Improvements Improvements (a),(b)
- ----------- ------------ ---- ------------ -------- --------- ------------ ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LAND HELD FOR INVESTMENT OR FUTURE DEVELOPMENT
- ----------------------------------------------
101 Second Street -
San Francisco, CA $ -- $ 11,698 $ -- $ -- $ -- $ 11,698 $ -- $ 11,698
Wildwood - Atlanta, GA -- 11,156 -- 4,737 (8,888) 7,005 -- 7,005
North Point Property -
Fulton Co., GA -- 10,294 -- 12,213 (16,942) 5,565 -- 5,565
Midtown - Atlanta, GA -- 2,949 -- 56 (1,607) 1,398 -- 1,398
McMurray - Cobb Co., GA. -- 1,015 -- 172 (1,092) 95 -- 95
Lawrenceville -
Gwinnett Co., GA -- 5,543 -- 365 (5,044) 864 -- 864
Colonial Plaza MarketCenter -
Orlando, FL -- 1,649 -- 286 (1,218) 717 -- 717
Greenbrier MarketCenter
Outparcels -
Chesapeake, VA -- 3,191 -- 201 (2,985) 407 -- 407
Lovejoy Station Outparcels -
Clayton Co., GA -- 575 -- -- (376) 199 -- 199
---------------------------------------------------------------------------------------------
-- 48,070 -- 18,030 (38,152) 27,948 -- 27,948
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Column A Column F Column G Column H Column I
-------- -------- -------- -------- --------
Life on
Which De-
preciation
Accumu- In 1997
lated Date of Income
Deprecia- Construc- Date Statement
Description tion (a) tion Acquired Is Computed
- ----------- --------- --------- -------- -----------
<S> <C> <C> <C> <C>
LAND HELD FOR INVESTMENT OR FUTURE DEVELOPMENT
- ----------------------------------------------
101 Second Street -
San Francisco, CA $ -- -- 1997 --
Wildwood - Atlanta, GA -- -- 1971-1982,1989 --
North Point Property -
Fulton Co., GA -- -- 1970-1985 --
Midtown - Atlanta, GA -- -- 1984 --
McMurray - Cobb Co., GA. -- -- 1981 --
Lawrenceville -
Gwinnett Co., GA -- -- 1994 --
Colonial Plaza MarketCenter -
Orlando, FL -- -- 1995 --
Greenbrier MarketCenter
Outparcels -
Chesapeake, VA -- -- 1995 --
Lovejoy Station Outparcels -
Clayton Co., GA -- -- 1995 --
-------
--
-------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE III
(Page 2 of 5)
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
($ in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Costs Capitalized Gross Amount at Which
Initial Cost Subsequent Carried at
to Company to Acquisition December 31, 1997
------------ ----------------- -----------------------------------
Carrying
Costs
Buildings Less Cost Land Buildings
and Improve- of Sales and Land and Total
Description Encumbrances Land Improvements ments and Other Improvements Improvements (a),(b)
- ----------- ------------ ---- ------------ -------- --------- ------------ ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING PROPERTIES
- --------------------
First Union Tower -
Greensboro, N.C. $ -- $ 1,394 $ -- $ 30,597 $ 1,971 $ 1,399 $32,563 $ 33,962
Wildwood - 3301 Windy
Ridge - Atlanta, GA -- 20 -- 8,928 1,519 1,237 9,230 10,467
Wildwood - 3100 Windy Hill
Road - Atlanta, GA -- -- 17,005 -- -- -- 17,005 17,005
Kennesaw - Cobb Co., GA -- -- -- 2,351 -- -- 2,351 2,351
615 Peachtree Street -
Atlanta, GA -- 4,740 6,930 -- -- 4,740 6,930 11,670
100 North Point Center East -
Fulton Co., GA 12,447 419 -- 11,868 504 419 12,372 12,791
200 North Point Center East -
Fulton County, GA 12,446 419 -- 10,705 363 419 11,068 11,487
101 Independence Center -
Charlotte, NC 48,928 11,096 62,419 -- -- 11,096 62,419 73,515
Perimeter Expo -
Atlanta, GA 21,061 8,564 -- 11,134 71 8,564 11,205 19,769
North Point
Stand Alone Retail Sites -
Fulton Co., GA -- 4,559 -- 164 (981) 3,742 -- 3,742
North Point MarketCenter -
Fulton Co., GA 29,068 8,500 -- 17,997 506 8,500 18,503 27,003
Presidential MarketCenter -
Gwinnett Co., GA -- 3,956 -- 18,949 817 3,956 19,766 23,722
</TABLE>
<TABLE>
<CAPTION>
Column A Column F Column G Column H Column I
-------- -------- -------- -------- --------
Life on
Which De-
preciation
Accumu- In 1997
lated Date of Income
Deprecia- Construc- Date Statement
Description tion (a) tion Acquired Is Computed
- ----------- --------- --------- -------- -----------
<S> <C> <C> <C> <C>
OPERATING PROPERTIES
- --------------------
First Union Tower -
Greensboro, N.C. $11,065 1988-1990 1987 40 Years
Wildwood - 3301 Windy
Ridge - Atlanta, GA 3,908 1984 1984 30 Years
Wildwood - 3100 Windy Hill
Road - Atlanta, GA 680 1997 1997 25 Years
Kennesaw - Cobb Co., GA 1,443 1974 1973 30 Years
615 Peachtree Street -
Atlanta, GA 660 -- 1996 15 Years
100 North Point Center East -
Fulton Co., GA 1,197 1994 1994 40 Years
200 North Point Center East -
Fulton County, GA 720 1995 1995 --
101 Independence Center -
Charlotte, NC 2,900 -- 1996 25 Years
Perimeter Expo -
Atlanta, GA 1,787 1993 1993 30 Years
North Point
Stand Alone Retail Sites -
Fulton Co., GA 75 -- 1970-1985 --
North Point MarketCenter -
Fulton Co., GA 3,073 1993-1994 1970-1985 30 Years
Presidential MarketCenter -
Gwinnett Co., GA 1,470 1993-1995 1993 30 Years
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE III
(Page 3 of 5)
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
($ in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Costs Capitalized Gross Amount at Which
Initial Cost Subsequent Carried at
to Company to Acquisition December 31, 1997
------------ ----------------- -----------------------------------
Carrying
Costs
Buildings Less Cost Land Buildings
and Improve- of Sales and Land and Total
Description Encumbrances Land Improvements ments and Other Improvements Improvements (a),(b)
- ----------- ------------ ---- ------------ -------- --------- ------------ ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING PROPERTIES (Continued)
- --------------------------------
Mansell Crossing Phase II -
Fulton Co., GA $ -- $ 3,272 $ -- $ 5,171 $ 470 $ 3,272 $ 5,641 $ 8,913
Greenbrier MarketCenter -
Chesapeake, VA -- 5,500 -- 26,441 1,584 5,500 28,025 33,525
Colonial Plaza MarketCenter -
Orlando, FL -- 8,500 -- 30,138 1,905 8,500 32,043 40,543
Los Altos MarketCenter -
Long Beach, CA -- 4,900 -- 16,178 580 4,900 16,758 21,658
Miscellaneous -- 398 145 77 (473) -- 147 147
----------------------------------------------------------------------------------------------
123,950 66,237 86,499 190,698 8,836 66,244 286,026 352,270
----------------------------------------------------------------------------------------------
PROJECTS UNDER CONSTRUCTION
- ---------------------------
333 North Point Center East -
Fulton County, GA $ -- $ 587 $ -- $ 9,528 $ 453 $ 587 $ 9,981 $ 10,568
Presbyterian Medical
Plaza at University -
Charlotte, NC -- -- -- 6,923 189 -- 7,112 7,112
Abbotts Bridge Station -
Fulton Co., GA -- 2,856 -- 7,477 449 2,856 7,926 10,782
Laguna Niguel Promenade -
Laguna Niguel, CA -- 5,578 -- 3,342 208 5,578 3,550 9,128
Meridian Mark Plaza -
Atlanta, GA -- 2,200 -- 3,162 257 2,200 3,419 5,619
Grandview II -
Birmingham, AL -- 2,010 -- 8,844 337 2,010 9,181 11,191
</TABLE>
<TABLE>
<CAPTION>
Column A Column F Column G Column H Column I
-------- -------- -------- -------- --------
Life on
Which De-
preciation
Accumu- In 1997
lated Date of Income
Deprecia- Construc- Date Statement
Description tion (a) tion Acquired Is Computed
- ----------- --------- --------- -------- -----------
<S> <C> <C> <C> <C>
OPERATING PROPERTIES (Continued)
- --------------------------------
Mansell Crossing Phase II -
Fulton Co., GA $ 291 1995 1995 30 Years
Greenbrier MarketCenter -
Chesapeake, VA 1,287 1995 1995 30 Years
Colonial Plaza MarketCenter -
Orlando, FL 2,042 1995 1995 --
Los Altos MarketCenter -
Long Beach, CA 658 1996 1996 --
Miscellaneous 113 -- 1977-1984 Various
-------
33,369
-------
PROJECTS UNDER CONSTRUCTION
- ---------------------------
333 North Point Center East -
Fulton County, GA $ -- 1996 1996 --
Presbyterian Medical
Plaza at University -
Charlotte, NC -- 1996 1996 --
Abbotts Bridge Station -
Fulton Co., GA -- 1997 1997 --
Laguna Niguel Promenade -
Laguna Niguel, CA -- 1997 1997 --
Meridian Mark Plaza -
Atlanta, GA -- 1997 1997 --
Grandview II -
Birmingham, AL -- 1997 1997 --
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE III
(Page 4 of 5)
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
($ in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Costs Capitalized Gross Amount at Which
Initial Cost Subsequent Carried at
to Company to Acquisition December 31, 1997
------------ ----------------- -----------------------------------
Carrying
Costs
Buildings Less Cost Land Buildings
and Improve- of Sales and Land and Total
Description Encumbrances Land Improvements ments and Other Improvements Improvements (a),(b)
- ----------- ------------ ---- ------------ -------- --------- ------------ ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PROJECTS UNDER CONSTRUCTION (Continued)
- ---------------------------------------
Other $ -- $ 378 $ -- $ -- $ -- $ 378 $ -- $ 378
----------------------------------------------------------------------------------------------
-- 13,609 -- 39,276 1,893 13,609 41,169 54,778
----------------------------------------------------------------------------------------------
RESIDENTIAL LOTS UNDER DEVELOPMENT
- ----------------------------------
Brown's Farm -
Cobb Co., GA -- 3,154 -- 4,549 (5,277) 2,426 -- 2,426
Apalachee River Club -
Gwinnett Co., GA -- 1,820 -- 3,613 (2,459) 2,974 -- 2,974
Echo Mill -
Cobb Co., GA -- 5,298 -- 5,203 (5,916) 4,585 -- 4,585
Barrett Downs -
Forsyth Co., GA -- 1,489 -- 2,426 (2,312) 1,603 -- 1,603
Bradshaw Farm -
Cherokee Co., GA -- 5,100 -- 8,259 (11,037) 2,322 -- 2,322
Alcovy Woods -
Gwinnett Co., GA 568 1,142 -- 684 (794) 1,032 -- 1,032
----------------------------------------------------------------------------------------------
568 18,003 -- 24,734 (27,795) 14,942 -- 14,942
----------------------------------------------------------------------------------------------
$ 124,518 $ 145,919 $86,499 $272,738 $(55,218) $122,743 $327,195 $449,938
==============================================================================================
</TABLE>
<TABLE>
<CAPTION>
Column A Column F Column G Column H Column I
-------- -------- -------- -------- --------
Life on
Which De-
preciation
Accumu- In 1997
lated Date of Income
Deprecia- Construc- Date Statement
Description tion (a) tion Acquired Is Computed
- ----------- --------- --------- -------- -----------
<S> <C> <C> <C> <C>
PROJECTS UNDER CONSTRUCTION (Continued)
- ---------------------------------------
Other $ -- -- 1996 --
-------
--
-------
RESIDENTIAL LOTS UNDER DEVELOPMENT
- ----------------------------------
Brown's Farm -
Cobb Co., GA -- 1993-1994 1993-1994 --
Apalachee River Club -
Gwinnett Co., GA -- 1994 1994 --
Echo Mill -
Cobb Co., GA -- 1994 1994 --
Barrett Downs -
Forsyth Co., GA -- 1994 1994 --
Bradshaw Farm -
Cherokee Co., GA -- 1994 1994 --
Alcovy Woods -
Gwinnett Co., GA -- 1996 1996 --
-------
--
--------
$ 33,369
========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE III
(Page 5 of 5)
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
($ in thousands)
NOTES:
(a) Reconciliations of total real estate carrying value and accumulated
depreciation for the three years ended December 31, 1997 are as
follows:
Real Estate Accumulated Depreciation
----------- ------------------------
1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period $377,663 $235,344 $149,242 $20,339 $15,483 $12,112
Additions during the period:
Improvements and other
capitalized costs 100,714 181,682 97,036 -- -- --
Provision for depreciation -- -- -- 13,030 5,571 3,371
------------------------------ --------------------------
100,714 181,682 97,036 13,030 5,571 3,371
------------------------------ --------------------------
Deductions during the period:
Cost of real estate sold (28,439) (39,363) (10,934) -- (715) --
------------------------------ --------------------------
(28,439) (39,363) (10,934) -- (715) --
------------------------------ --------------------------
Balance at close of period $449,938 $377,663 $235,344 $33,369 $20,339 $15,483
============================== ==========================
(b) Initial cost for Kennesaw was previously adjusted to reflect a write-
down of $1,430 to state the property at the then realizable value.
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Partners of Wildwood Associates and Green Valley Associates II:
We have audited the accompanying combined balance sheets of WILDWOOD ASSOCIATES
(a Georgia general partnership) and GREEN VALLEY ASSOCIATES II (a North Carolina
general partnership) as of December 31, 1997 and 1996, and the related combined
statements of income, partners' capital and cash flows for each of the three
years in the period ended December 31, 1997. These financial statements are the
responsibility of the management of the partnerships. Our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion. In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Wildwood Associates and Green
Valley Associates II as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in Item 14 is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 16, 1998
<PAGE>
<TABLE>
<CAPTION>
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II
--------------------------------------------------
COMBINED BALANCE SHEETS
-----------------------
DECEMBER 31, 1997 AND 1996
--------------------------
($ in thousands)
1997 1996
------- --------
ASSETS
- ------
<S> <C> <C>
REAL ESTATE ASSETS:
- -------------------
Income producing properties, including land of
$44,366 in 1997 and 1996 (Note 7) $271,227 $239,647
Accumulated depreciation and amortization (56,354) (48,699)
-------------------
214,873 190,948
Projects under construction -- 19,670
Land committed to be contributed (Note 3) 9,405 9,405
Land and property predevelopment costs 11,828 11,862
-------------------
Total real estate assets 236,106 231,885
-------------------
CASH AND CASH EQUIVALENTS 9,413 16,511
-------------------
OTHER ASSETS:
Deferred expenses, net of accumulated amortization of
$7,091 and $6,365 in 1997 and 1996, respectively 6,636 7,249
Receivables (Note 6) 11,451 15,330
Allowance for possible losses (Note 1) (2,550) (2,550)
Furniture, fixtures and equipment, net of accumulated
depreciation of $364 and $1,153 in 1997 and 1996,
respectively 733 456
Other 39 29
-------------------
16,309 20,514
-------------------
$261,828 $268,910
===================
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
NOTES PAYABLE (Note 7) $193,861 $166,490
RETAINAGE, ACCOUNTS PAYABLE AND
ACCRUED LIABILITIES 7,503 11,762
-------------------
Total liabilities 201,364 178,252
-------------------
PARTNERS' CAPITAL (Notes 3 and 4):
International Business Machines Corporation 30,232 45,329
Cousins Properties Incorporated 30,232 45,329
-------------------
Total partners' capital 60,464 90,658
-------------------
$261,828 $268,910
===================
</TABLE>
The accompanying notes are an integral part of these combined balance sheets.
<PAGE>
<TABLE>
<CAPTION>
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II
--------------------------------------------------
COMBINED STATEMENTS OF INCOME
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
($ in thousands)
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
REVENUES:
Rental income and recovery of expenses
charged directly to specific tenants $38,507 $40,351 $37,589
Interest 474 39 32
Other 134 115 146
-------------------------
Total revenues 39,115 40,505 37,767
-------------------------
EXPENSES:
Real estate taxes 3,471 3,579 3,032
Maintenance and repairs 2,791 2,622 2,207
Utilities 2,031 2,182 1,965
Management and personnel costs 2,262 2,217 1,892
Contract security 1,051 1,094 820
Grounds maintenance 823 776 646
Expenses charged directly to specific tenants 444 417 395
Insurance 93 93 98
Interest expense 12,972 9,712 11,478
Depreciation and amortization 8,798 8,372 8,353
Predevelopment, marketing and other expenses 283 293 345
Ground lease expense (Note 8) -- 295 322
Real estate taxes on undeveloped land (Note 3) 143 208 163
General and administrative expenses 147 155 167
-------------------------
Total expenses 35,309 32,015 31,883
-------------------------
NET INCOME $ 3,806 $ 8,490 $ 5,884
=========================
The accompanying notes are an integral part of these combined statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II
--------------------------------------------------
COMBINED STATEMENTS OF PARTNERS' CAPITAL
----------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
($ in thousands)
International
Business Cousins
Machines Properties
Corporation Incorporated Total
----------- ------------ -----
<S> <C> <C> <C>
BALANCE, December 31, 1994 $46,142 $46,142 $92,284
Distributions (4,000) (4,000) (8,000)
Net income 2,942 2,942 5,884
---------------------------------------
BALANCE, December 31, 1995 45,084 45,084 90,168
Distributions (4,000) (4,000) (8,000)
Net income 4,245 4,245 8,490
---------------------------------------
BALANCE, December 31, 1996 $45,329 $45,329 $90,658
Distributions (17,000) (17,000) (34,000)
Net income 1,903 1,903 3,806
---------------------------------------
BALANCE, December 31, 1997 $30,232 $30,232 $60,464
=======================================
The accompanying notes are an integral part of these combined statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II
--------------------------------------------------
COMBINED STATEMENTS OF CASH FLOWS (Note 9)
------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
($ in thousands)
1997 1996 1995
------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 3,806 $ 8,490 $ 5,884
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 8,798 8,372 8,353
Effect of recognizing rental revenues
on a straight-line basis 3,311 421 (383)
Change in tenant rental receivables 297 (562) (38)
Change in accounts payable and accrued
liabilities related to operations (423) 3,557 (1,004)
---------------------------
Net cash provided by operating activities 15,789 20,278 12,812
---------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property acquisition and development
expenditures (15,501) (34,871) (4,940)
Payment for deferred expenses, furniture,
fixtures and equipment, and other assets (757) (2,978) (2,123)
---------------------------
Net cash used in investing activities (16,258) (37,849) (7,063)
---------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable (2,629) (1,610) (1,063)
Repayment of long term financing -- -- (111,998)
Proceeds from long term financing 30,000 70,000 --
Proceeds from long term refinancing -- -- 98,000
Proceeds from line of credit -- 75,733 31,212
Repayments under line of credit -- (102,041) (13,904)
Partnership distributions (34,000) (8,000) (8,000)
---------------------------
Net cash (used in) provided by financing
activities (6,629) 34,082 (5,753)
---------------------------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (7,098) 16,511 (4)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 16,511 -- 4
---------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 9,413 $ 16,511 $ --
===========================
The accompanying notes are an integral part of these combined statements.
</TABLE>
<PAGE>
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation:
The Combined Financial Statements include the accounts of Wildwood
Associates ("WWA") and Green Valley Associates II ("GVA II"), both of which are
general partnerships. Cousins Properties Incorporated (together with its other
consolidated entities hereinafter referred to as "Cousins") and International
Business Machines Corporation ("IBM") each have a 50% general partnership
interest in both partnerships. The financial statements of the partnerships have
been combined because of the common ownership. The combined entities are
hereinafter referred to as the "Partnerships." All transactions between WWA and
GVA II have been eliminated in the Combined Financial Statements.
Cost of Property Contributed by Cousins:
The cost of property contributed or committed to be contributed by
Cousins was recorded by WWA based upon the procedure described in Note 3. Such
cost was, in the opinion of the partners, at or below estimated fair market
value at the time of such contribution or commitment, but was in excess of
Cousins' historical cost basis.
Cost Capitalization:
All costs related to planning, development and construction of
buildings, and expenses of buildings prior to the date they become operational
for financial statement purposes, are capitalized. Interest and real estate
taxes are also capitalized to property under development.
Depreciation and Amortization:
Real estate assets are stated at depreciated cost. Buildings are
depreciated over 25 to 40 years. Furniture, fixtures, and equipment are
depreciated over 3 to 5 years. Leasehold improvements and tenant improvements
are amortized over the life of the leases or useful life of the assets,
whichever is shorter. Deferred expenses - which include organizational costs,
certain marketing and leasing costs, and loan acquisition costs - are amortized
over the period of estimated benefit. The straight-line method is used for all
depreciation and amortization.
Allowance for Possible Losses:
The allowance for possible losses provides for potential writeoffs of
certain tenant receivables and other tenant related assets on WWA's books. The
allowance reflects management's evaluation of the exposure to WWA based on a
specific review of its properties and the impact of current economic conditions
on those properties.
Allocation of Operating Expenses:
In accordance with certain lease agreements, certain management and
maintenance costs incurred by WWA are allocated to individual buildings or
tenants, including buildings not owned by WWA.
Income Taxes:
No provision has been made for federal or state income taxes because
each partner's proportionate share of income or loss from the Partnerships is
passed through to be included on each partner's separate tax return.
Cash and Cash Equivalents:
Cash and Cash Equivalents includes all cash and highly liquid money
market instruments. Highly liquid money market instruments include securities
and repurchase agreements with original maturities of three months or less,
money market mutual funds, and securities on which the interest rate is adjusted
to market rate at least every three months.
Rental Income:
In accordance with Statement of Financial Accounting Standards ("SFAS")
No. 13, income on leases which include scheduled increases in rental rates over
the lease term (other than scheduled increases based on the Consumer Price Index
("Index")) is recognized on a straight-line basis.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. FORMATION AND PURPOSE OF THE PARTNERSHIPS
WWA and GVA II were formed under the terms of partnership agreements
effective May 30, 1985 and March 31, 1988, respectively. The purpose of the
Partnerships is, among other things, to develop and operate selected property
within Wildwood Office Park ("Wildwood"), located in Atlanta, Georgia and the
Summit Green project located in Greensboro, North Carolina.
Wildwood is an office park containing a total of approximately 289
acres, of which approximately 94 acres are owned by WWA, and an estimated 15
acres are committed to be contributed to WWA by Cousins (see Note 3). Cousins
owns the balance of the developable acreage in the park. At December 31, 1997,
WWA's income producing real estate assets in Wildwood consisted of: six office
buildings totaling 2,132,000 rentable square feet (including land under such
buildings totaling approximately 56 acres); land parcels totaling approximately
15 acres leased to two banking facilities and five restaurants; and a 2 acre
site on which a child care facility is constructed. In addition, WWA's assets
include 36 acres of land held for future development, which is composed of a 4
acre site with approximately 58,000 square feet of office space which was
purchased in 1986 for future development (classified with income producing
properties in the accompanying financial statements), and 32 acres of other land
to be developed (including additional land committed to be contributed by
Cousins) (see Note 3).
See Note 8 where the disposition of the Summit Green property is
discussed.
3. CONTRIBUTIONS TO THE PARTNERSHIPS
IBM and Cousins have each contributed or committed to contribute
$62,857,000 in cash or properties to the Partnerships. The value of property
contributed by IBM was agreed to by the partners at the time of formation of WWA
and was recorded at the cash amount IBM paid for the property just prior to
contributing it to the Partnership. The value of the property contributed and to
be contributed by Cousins was recorded on the Partnership's books at an amount
equal to the cash and property contributed by IBM for an equal (50%) partnership
interest.
The status of contributions at December 31, 1997, was as follows ($ in
thousands):
<TABLE>
<CAPTION>
IBM COUSINS TOTAL
------- ------- --------
<S> <C> <C> <C>
Cash contributed $46,590 $ 84 $ 46,674
Property contributed 16,267 53,853 70,120
Land committed to be contributed -- 8,920 8,920
--------------------------------
Total $62,857 $62,857 $125,714
================================
</TABLE>
WWA has elected not to take title to the remaining land committed to be
contributed by Cousins until such land is needed for development. However,
Cousins' capital account was previously credited with the amount originally
required to bring it equal to IBM's, and a like amount, plus preacquisition
costs paid by WWA, were set up as an asset entitled "Land Committed To Be
Contributed." This asset account subsequently has been reduced as land actually
has been contributed, or as land yet to be contributed became associated with a
particular building.
At December 31, 1997, Cousins was committed to contribute land on which
an additional 678,051 GSF are developable, provided that regardless of planned
use or density, 38,333 GSF shall be the minimum GSF attributed to each
developable acre contributed. Cousins has also agreed to contribute
infrastructure land in Wildwood, as defined, at no cost to WWA, in order to
provide the necessary land for development of roads and utilities. The ultimate
acreage remaining to be contributed by Cousins will depend upon the actual
density achieved, but would be approximately 15 acres if the density were
similar to that achieved on land contributed to date.
WWA pays all of the expenses related to the Land Committed to be
Contributed which were approximately $143,000, $208,000 and $163,000 in 1997,
1996 and 1995, respectively.
4. OTHER PROVISIONS OF THE PARTNERSHIP AGREEMENTS
Net income or loss and net cash flow, as defined, shall be allocated to
the partners based on their percentage interests (50% each, subject to
adjustment as provided in the partnership agreements).
In the event of dissolution of the Partnerships, the assets will be
distributed as follows:
First, to repay all debts to third parties, including any
secured loans with the partners.
Second, to each partner until each capital account is reduced
to zero.
The balance to each partner in accordance with its percentage
interest.
5. FEES TO RELATED PARTIES
The Partnerships engaged Cousins to manage, develop and lease the
Partnerships' property. Fees to Cousins incurred by the Partnerships during
1997, 1996 and 1995 were as follows ($ in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Development and tenant
construction fees $ 406 $ 604 $ 250
Management fees 1,047 1,032 945
Leasing and procurement fees 223 1,105 235
----------------------------
$1,676 $2,741 $1,430
============================
</TABLE>
6. RENTAL REVENUES
WWA leases property to the partners, as well as to unrelated third
parties. The leases with partners are at rates comparable to those quoted to
third parties. The leases typically contain escalation provisions and provisions
requiring tenants to pay a pro rata share of operating expenses. The leases
typically include renewal options and all are classified and accounted for as
operating leases.
At December 31, 1997, future minimum rentals to be received under
existing non-cancelable leases, including tenants' current pro rata share of
operating expenses are as follows ($ in thousands):
<TABLE>
<CAPTION>
Leases
Leases With
With Third
Partners Parties Total
-------- ------- -----
<S> <C> <C> <C>
1998 $10,403 $ 19,482 $ 29,885
1999 10,145 16,760 26,905
2000 9,915 14,805 24,720
2001 7,728 13,474 21,202
2002 8,555 12,811 21,366
Thereafter 23,083 31,078 54,161
------------------------------------------
$69,829 $108,410 $178,239
==========================================
</TABLE>
At December 31, 1997 and 1996, receivables which related to the
cumulative excess of revenues recognized in accordance with SFAS No. 13 over
revenues which accrued in accordance with the actual lease agreements totaled
$11,020,000 and $14,331,000, respectively. Of the 1997 amount, 84% was related
to leases with IBM.
7. NOTES PAYABLE
At December 31, 1997, notes payable included the following ($ in
thousands):
<TABLE>
<CAPTION>
Term/
Amortization Balance at
Period Final December 31,
Description Rate (Years) Maturity 1997
----------- ---------------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Line of credit ($10 million maximum) Fed Funds + .75% 1/ N/A 9/1/98 $ --
2300 Windy Ridge Parkway Building mortgage note 7.56% 10/25 12/01/05 69,995
3200 Windy Hill Road Building mortgage note 8.23% 10/28 1/1/07 69,389
4100/4300 Wildwood Parkway Buildings mortgage note 7.65% 15/25 4/1/12 29,696
2500 Windy Ridge Parkway Building mortgage note 7.45% 10/20 12/15/05 24,781
--------
$193,861
========
</TABLE>
On March 20, 1997, WWA completed the financing of the 4100 and 4300
Wildwood Parkway Buildings with a $30 million non-recourse mortgage note payable
at an interest rate of 7.65% and a maturity of April 1, 2012. In conjunction
with this financing and a portion of the $70 million financing of the 3200 Windy
Hill Road Building completed in December 1996, WWA made non-operating cash
distributions of $12.5 million to each partner and paid the entire calendar year
1997 operating distribution of $4.5 million to each partner.
The 2300 Windy Ridge Parkway Building, the 3200 Windy Hill Road
Building, and the 4100/4300 Wildwood Parkway Buildings mortgage notes provide
for additional amortization in the later years of the notes (over that required
by the amortization periods shown above) concurrent with scheduled rent
increases.
The line of credit matures September 1, 1998, but will automatically be
renewed from year to year unless the lender provides a notice of non-renewal at
least three months in advance of the annual renewal date. The line generally
prohibits new borrowings other than those under the line, or the pledging of any
assets not pledged as of August 1, 1990, without the Lender's prior approval.
The line bears a floating interest rate equal to the daily federal funds rate
plus 3/4%, and there are no fees or compensating balance arrangements required
under the line. Cousins and IBM have each severally guaranteed one-half of the
line of credit. Assets with net carrying values of $167,671,000 were pledged as
security on the Partnerships' debt.
The aggregate maturities of the indebtedness at December 31, 1997
summarized above are as follows ($ in thousands):
1998 $ 3,952
1999 4,265
2000 4,604
2001 5,131
2002 5,670
Thereafter 170,239
--------
$193,861
========
The Partnerships capitalize interest expense to property under
development as required by SFAS No. 34. In the years ended December 31, 1997 and
1996, the Partnerships capitalized interest totaling $1,998,000 and $1,053,000,
respectively.
The estimated fair value of the notes payable at December 31, 1997 was
approximately $209 million, which was calculated by discounting future cash
flows under the notes at estimated rates at which similar notes would be made
currently.
8. DISPOSITION OF SUMMIT GREEN
Effective December 1, 1996, WWA disposed of its interest in a 144,000
GSF office building at Summit Green in exchange for cancellation of the related
mortgage debt. In connection with this disposition, the Partnerships also may
dispose of their leasehold interest in land adjacent to the office building. The
Partnerships anticipate no material gain or loss will result from their
disposition of the Summit Green project.
The land adjacent to the formerly owned office building is subject to a
non-subordinated ground lease expiring October 31, 2084. Lease payments
effective December 1, 1996 are approximately $256,000 per year, and escalate at
ten year intervals based on the cumulative increase in the Index over the prior
ten year period (subject to a 5% annual cap on the increase in such Index in any
one year). The next escalation date is December 1, 2006.
9. COMBINED STATEMENTS OF CASH FLOWS-SUPPLEMENTAL INFORMATION
Interest paid (net of amounts capitalized) was as follows ($ in
thousands):
1997 1996 1995
---- ---- ----
Interest paid $12,700 $9,096 $12,011
Significant non-cash financing and investing activities included the
following:
In 1996, land parcels with a cost of $4,498,000 were transferred from
Land Committed To Be Contributed to Land and Property Predevelopment Cost.
In 1996, the Partnerships recorded the disposition of the Summit Green
project (including the office building and the anticipated disposition of the
leasehold interest in the adjacent land) having a total cost of $10,447,000, and
the cancellation of $10,447,000 of related debt (see Note 8).
In 1996, two buildings with a total cost of $29,368,000 were
transferred from Projects Under Construction to Income Producing Properties. In
1997, one building with a total cost of $29,807,000 was transferred from
Projects Under Construction to Income Producing Properties.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE III
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
($ in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Costs Capitalized Gross Amount at Which
Initial Cost Subsequent Carried at
to Venture to Acquisition December 31, 1997
------------------- -------------------- -----------------------------------
Carrying
Costs
Buildings Less Cost Land Buildings
and Improve- of Sales and Land and Total
Description Encumbrances Land Improvements ments and Other Improvements Improvements (a)
- ----------- ------------ ---- ------------ ----- --------- ------------ ------------ ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Wildwood Office Park -
Cobb Co., GA
2500 Windy Ridge $ 24,781 $ 4,414 $ 14,814 $ 10,435 $ 141 $ 4,414 $ 25,390 $ 29,804
2300 Windy Ridge 69,995 8,927 -- 62,247 5,429 8,927 67,676 76,603
Parkside -- 4,274 2,553 (1,029) (45) 3,136 2,617 5,753
3200 Windy Hill 69,389 10,503 -- 67,840 5,470 10,503 73,310 83,813
4100/4300 Wildwood Parkway 29,696 6,689 -- 22,945 251 6,689 23,196 29,885
4200 Wildwood Parkway -- 4,347 -- 25,085 375 -- 29,807 29,807
Stand Alone Retail Sites -- 7,659 1,234 3,691 123 9,570 3,137 12,707
Land committed to
be contributed -- 9,023 -- -- 382 9,405 -- 9,405
Other land and
property -- 11,430 -- 3,426 (173) 11,575 3,108 14,683
--------------------------------------------------------------------------------------------
$193,861 $67,266 $ 18,601 $194,640 $ 11,953 $64,219 $228,241 $292,460
============================================================================================
</TABLE>
<TABLE>
<CAPTION>
Column A Column F Column G Column H Column I
-------- -------- -------- -------- --------
Life on
Which De-
preciation
Accumu- In 1997
lated Date of Income
Deprecia- Construc- Date Statement
Description tion (a) tion Acquired Is Computed
- ----------- -------- --------- -------- -----------
Wildwood Office Park -
Cobb Co., GA
<S> <C> <C> <C> <C>
2500 Windy Ridge $10,004 1985 1985 40 Years
2300 Windy Ridge 22,416 1986 1986 40 Years
Parkside 2,098 1980 1986 25 Years
3200 Windy Hill 18,565 1989 1989 40 Years
4100/4300 Wildwood Parkway 1,449 1995 1986 40 Years
4200 Wildwood Parkway -- 1996 1986 --
Stand Alone Retail Sites 1,180 Various 1985-1995 Various
Land committed to
be contributed -- -- 1985-1986 --
Other land and
property 642 Various 1985-1986 Various
------
$56,354
=======
</TABLE>
<TABLE>
<CAPTION>
NOTE: (a) Reconciliations of total real estate carrying value and accumulated
depreciation for the three years ended December 31, 1997 are as
follows:
Real Estate Accumulated Depreciation
---------------------------------- -------------------------------
1997 1996 1995 1997 1996 1995
-------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period $280,584 $259,428 $250,738 $48,699 $44,900 $40,009
Additions during the period:
Improvements, and other
capitalized costs 11,876 32,361 8,690 -- -- --
Provisions for depreciation -- -- -- 7,655 7,296 4,891
Deductions during the period:
Retirement of fully depreciated
assets and writeoffs -- -- -- -- (16) --
Disposition of Summit Green
Office Building -- (11,205) -- -- (3,481) --
---------------------------------- -------------------------------
Balance at close of period $292,460 $280,584 $259,428 $56,354 $48,699 $44,900
================================== ===============================
</TABLE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Partners of
CSC Associates, L.P. (A Limited Partnership)
We have audited the accompanying balance sheets of CSC Associates, L.P. (the
Partnership) as of December 31, 1997 and 1996, and the related statements of
operations, partners' capital, and cash flows for each of the three years in the
period ended December 31, 1997. Our audits also included the financial statement
schedule of CSC Associates, L.P. listed in the Index at Item 14(a). These
financial statements and schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits. We conducted our audits in
accordance with generally accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion. In our opinion, the financial
statements referred to above present fairly, in all material respects, the
financial position of CSC Associates, L.P. as of December 31, 1997 and 1996, and
the results of its operations and its cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
ERNST & YOUNG LLP
Atlanta, Georgia
February 2, 1998
<PAGE>
<TABLE>
<CAPTION>
CSC ASSOCIATES, L.P.
--------------------
BALANCE SHEETS
--------------
DECEMBER 31, 1997 AND 1996
--------------------------
($ in thousands)
ASSETS
------
1997 1996
-------- --------
REAL ESTATE ASSETS:
<S> <C> <C>
Building and improvements, including land and
land improvements of $22,818 in 1997 and 1996 $209,120 $209,141
Accumulated depreciation (33,621) (27,621)
-------------------
175,499 181,520
-------------------
CASH 487 31
-------------------
NOTE RECEIVABLE (Note 4) 76,147 78,304
-------------------
OTHER ASSETS:
Deferred expenses, net of accumulated amortization
of $3,292 and $4,779 in 1997 and 1996, respectively 6,485 7,293
Other receivables (Note 3) 11,243 10,895
Furniture, fixtures and equipment, net of accumulated
depreciation of $22 and $1,311 in 1997 and 1996,
respectively 59 162
Other, net of accumulated amortization of $338 and
$256 in 1997 and 1996, respectively (Note 6) 1,425 1,486
-------------------
Total other assets 19,212 19,836
-------------------
$271,345 $279,691
===================
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
NOTE PAYABLE (Note 4) $ 76,147 $ 78,304
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 1,482 1,041
-------------------
Total liabilities 77,629 79,345
-------------------
PARTNERS' CAPITAL (Note 1) 193,716 200,346
-------------------
$271,345 $279,691
===================
The accompanying notes are an integral part of these balance sheets.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CSC ASSOCIATES, L.P.
--------------------
STATEMENTS OF OPERATIONS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
($ in thousands)
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
REVENUES:
Rental income and recovery of expenses
charged directly to specific tenants $35,159 $33,312 $31,195
Interest income (Note 4) 4,931 4,561 --
---------------------------
Total revenues 40,090 37,873 31,195
---------------------------
EXPENSES:
Real estate taxes 3,349 3,578 3,482
Utilities 887 967 1,103
Management and personnel costs 1,546 1,523 1,403
Cleaning 1,253 1,152 1,086
Contract security 474 640 434
Repairs and maintenance 461 408 349
Elevator 325 330 305
Parking 260 245 208
Insurance 106 112 116
Grounds maintenance 129 135 116
Interest expense (Note 4) 4,931 4,561 --
Depreciation and amortization 7,535 7,968 7,688
Marketing and other expenses 37 64 164
General and administrative expenses 77 82 44
---------------------------
Total expenses 21,370 21,765 16,498
---------------------------
NET INCOME $18,720 $16,108 $14,697
===========================
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CSC ASSOCIATES, L.P.
--------------------
STATEMENTS OF PARTNERS' CAPITAL
-------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
($ in thousands)
<S> <C>
BALANCE, December 31, 1994 $204,712
Net income 14,697
Distributions (15,471)
--------
BALANCE, December 31, 1995 203,938
Net income 16,108
Distributions (19,700)
--------
BALANCE, December 31, 1996 200,346
Net income 18,720
Distributions (25,350)
--------
BALANCE, December 31, 1997 $193,716
========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CSC ASSOCIATES, L.P.
--------------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
($ in thousands)
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $18,720 $16,108 $14,697
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 7,535 7,968 7,688
Rental revenue recognized on straight-line
basis in excess of rental revenue
specified in the lease agreements (238) (748) (1,148)
Change in other receivables and
other assets (90) (997) 7
Change in accounts payable and
accrued liabilities related to operations 454 (1,937) 1,122
---------------------------
Net cash provided by operating activities 26,381 20,394 22,366
---------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to building and improvements (433) (571) (6,918)
Payments for deferred expenses (112) (143) (1,285)
Investment in note receivable -- (80,000) --
Collection of note receivable 2,157 1,696 --
(Payments for) proceeds from furniture, fixtures
and equipment (30) (46) 10
---------------------------
Net cash provided by (used in) investing activities 1,582 (79,064) (8,193)
---------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable -- 80,000 --
Repayment of note payable (2,157) (1,696) --
Partnership distributions (25,350) (19,700) (15,471)
Net cash (used in) provided by financing activities (27,507) 58,604 (15,471)
NET INCREASE (DECREASE) IN CASH 456 (66) (1,298)
CASH AT BEGINNING OF YEAR 31 97 1,395
---------------------------
CASH AT END OF YEAR $ 487 $ 31 $ 97
===========================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for interest $ 4,937 $ 4,339 $ --
===========================
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
CSC ASSOCIATES, L.P.
--------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1997, 1996 AND 1995
--------------------------------
1. FORMATION OF THE PARTNERSHIP AND TERMS OF THE PARTNERSHIP AGREEMENT
CSC Associates, L.P. ("CSC," or the "Partnership") was formed under the
terms of a Limited Partnership Agreement dated September 29, 1989 and by the
filing of its Certificate of Limited Partnership on October 27, 1989. C&S
Premises, Inc. ("Premises") and Cousins Properties Incorporated ("CPI") each own
a 1% general partnership and a 49% limited partnership interest in the
Partnership. Premises is a wholly owned subsidiary of NB Holdings Corporation
which is a wholly owned subsidiary of NationsBank Corporation. The Partnership
was formed for the purpose of developing and owning a 1.4 million gross square
foot office tower in downtown Atlanta, Georgia (the "Building"), which is the
Atlanta headquarters of NationsBank Corporation.
The Partnership Agreement and related documents (the "Agreements")
contain among other provisions, the following:
a. CPI is the Managing Partner.
b. CPI is obligated to contribute a total of $18.2 million cash to the
Partnership, all of which has been contributed. Premises is obligated to
contribute land parcels to the Partnership having an aggregate agreed upon value
of $18.2 million, all of which has been contributed, which property value, in
the opinion of the partners, was equal to the estimated fair market value of the
land at the time of formation of the Partnership. The value of the property
contributed by Premises was recorded on the Partnership's books at an amount
equal to the cash contributed by CPI for an equal (50%) partnership interest. In
October 1993, the partners each contributed an additional $86.7 million.
c. No interest is earned on partnership capital.
d. Net income or loss and cash distributions are allocated to the
partners based on their percentage interests (50% each), subject to a preference
to CPI. The CPI preference was $2.5 million, and accrued to CPI, with interest
at 9% to the extent unpaid, over the period February 1, 1992 through January 31,
1995. During the year ended December 31, 1994, CPI received distributions of the
preference and accrued interest of approximately $2.65 million. The remaining
preference amount of $71,000 was distributed to CPI in January 1995. Amounts
above the preference amount are allocated based on the partners' percentage
interests.
2. SIGNIFICANT ACCOUNTING POLICIES
Capitalization Policies
All costs related to planning, development and construction of the
Building, and expenditures for the Building prior to the date it became
operational for financial statement purposes, have been capitalized. Interest
expense, amortization of financing costs, and real estate taxes were also
capitalized while the Building was under development.
Depreciation and Amortization
Real estate assets are carried at cost. Depreciation of the Building
commenced the date the Building became operational for financial statement
purposes and the Building is being depreciated over 40 years. Leasehold and
tenant improvements are amortized over the life of the leases or useful life of
the assets, whichever is shorter. Furniture, fixtures, and equipment are
depreciated over 5 years. Deferred expenses which include organizational costs,
certain marketing and leasing costs, and loan acquisition costs are amortized
over the period of estimated benefit. The straight line method is used for all
depreciation and amortization.
Income Taxes
No provision has been made for federal or state income taxes because
each partner's proportionate share of income or loss from the Partnership will
be passed through to be included on each partner's separate tax return.
Rental Income
In accordance with Statement of Financial Accounting Standards No. 13
("SFAS No. 13"), income on leases which include increases in rental rates over
the lease term (other than scheduled increases based on the Consumer Price
Index) is recognized on a straight-line basis.
Allowance for Doubtful Accounts
From time to time, the Partnership evaluates the need to establish an
allowance for doubtful accounts based on a review of specific receivables. As of
December 31, 1997 and 1996, there is no allowance for doubtful accounts included
in the accompanying balance sheets.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
Reclassifications
Certain 1996 amounts have been reclassified to conform with 1997
presentation.
3. LEASES
The Partnership has leased office space to NB Holdings Corporation, as
well as to unrelated third parties. The lease with NB Holdings Corporation was
at rates comparable to those quoted to third parties. The leases contain
escalation provisions and provisions requiring tenants to pay a pro rata share
of operating expenses. The leases typically include renewal options and all are
classified and accounted for as operating leases.
At December 31, 1997, future minimum rentals to be received under
existing non-cancelable leases, including tenants' current pro rata share of
operating expenses, are as follows ($ in thousands):
<TABLE>
<CAPTION>
Lease Leases
With With
NB Holdings Third
Corporation Parties Total
----------- ------- -----
<S> <C> <C> <C>
1998 $ 16,762 $ 17,499 $ 34,261
1999 16,762 17,451 34,213
2000 16,762 17,440 34,202
2001 16,762 17,804 34,566
2002 16,785 18,412 35,197
Subsequent to 2002 153,237 90,334 243,571
-------- -------- --------
$237,070 $178,940 $416,010
======== ======== ========
</TABLE>
In the years ended December 31, 1997 and 1996, income recognized on a
straight-line basis exceeded income which would have accrued in accordance with
the lease terms by approximately $238,000 and $748,000, respectively. At
December 31, 1997 and 1996, receivables which related to the cumulative excess
of revenues recognized in accordance with SFAS No. 13 over revenues which
accrued in accordance with the actual lease agreements totaled approximately
$10,670,000 and $10,432,000, respectively. Of that amount, 19% was related to
leases with NB Holdings Corporation and 35% was related to each of two
professional services firms. At December 31, 1997, NB Holdings Corporation
leased approximately 46% and two professional services firms leased
approximately 15% and 14%, respectively, of the net rentable space of the
Building.
4. NOTE PAYABLE AND NOTE RECEIVABLE
On February 6, 1996, the Partnership issued $80 million of 6.377%
collateralized notes (the "Notes"). The Notes amortize in equal monthly
installments of $590,680 based on a 20 year amortization schedule, and mature
February 15, 2011. The Notes are non-recourse obligations of the Partnership and
are secured by a Deed to Secure Debt, Assignment of Rents and Security Agreement
covering the Partnership's interest in the Building. In conjunction with this
financing, Premises transferred its 1% general partnership interest in the
partnership to C&S Premises-SPE, Inc., a wholly owned subsidiary of Premises.
The Partnership has loaned the $80 million proceeds of the Notes to CPI
under a non-recourse loan (the "CPI Loan") secured by CPI's Partnership
interests under the same payment terms as those of the Notes. CPI paid all costs
of issuing the Notes and the CPI Loan, including a $400,000 fee to an affiliate
of NationsBank Corporation. In addition, CPI pays a monthly fee to an affiliate
of NationsBank Corporation of .025% of the outstanding principal balance of the
Notes which totaled approximately $232,000 and $220,000 in 1997 and 1996,
respectively.
The estimated fair value of both the note payable and related note
receivable at December 31, 1997 was $75 million which was calculated by
discounting future cash flows under the notes at estimated rates at which
similar notes would be made currently.
The Partnership also has an unsecured $3 million line of credit
provided by an affiliate of Premises. Interest on the line is paid at a floating
rate (6.35% weighted average rate in December 1997) and interest only is payable
quarterly through July 31, 1998, at which time the entire outstanding balance is
due. There were no borrowings under the line as of December 31, 1997 and 1996.
The maturities of the Notes at December 31, 1997 are as follows (in
thousands):
1998 $ 2,299
1999 2,450
2000 2,610
2001 2,782
2002 2,965
Subsequent to 2002 63,041
-------
$76,147
=======
5. RELATED PARTIES
- ---------------------
The Partnership engaged CPI and an affiliate of CPI to manage,
develop and lease the Building. During 1997, 1996 and 1995, fees to CPI
and its affiliate incurred by the Partnership were as follows ($ in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ------
<S> <C> <C> <C>
Development and tenant construction fees $ 17 $ 13 $ 88
Leasing and procurement fees 32 101 229
Management fees 870 815 744
---- ---- ------
$919 $929 $1,061
==== ==== ======
</TABLE>
6. PARKING AGREEMENT
- -----------------------
On February 7, 1996, CSC entered into a 25 year Cross Parking License
Agreement ("Parking Agreement") with the North Avenue Presbyterian Church
("NAPC") which allows CSC the use of 200 parking spaces in NAPC's parking deck
which is located adjacent to NAPC. The agreement commenced on October 1, 1996.
CSC paid a $1,000,000 contribution toward the construction cost of the parking
deck as consideration for the Parking Agreement. The $1,000,000 contribution is
included in Other Assets and is being amortized over the 25 year life of the
Parking Agreement. NAPC may reduce the number of parking spaces available to the
Partnership or may terminate the Parking Agreement under certain conditions
after the sixth year, at which time a partial refund of the $1,000,000 would be
due to CSC. In addition, CSC is responsible for the maintenance of the parking
deck and the payment of the related operating expenses.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE III
CSC ASSOCIATES, L.P.
--------------------
REAL ESTATE AND ACCUMULATED DEPRECIATION
----------------------------------------
DECEMBER 31, 1997
-----------------
($ in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Costs Capitalized Gross Amount at Which
Initial Cost Subsequent Carried at
to Company to Acquisitions December 31, 1997
------------------ -------------------- ----------------------------------
Carrying
Costs
and Improve- of Sales and Land and Total
Description Encumbrances Land Improvements ments and Other Improvements Improvements (a)
- ----------- ------------ ---- ------------ -------- --------- ------------ ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NationsBank Plaza
Atlanta, Georgia $ -- $ 18,200 $ -- $180,471 $ 10,449 $ 22,818 $186,302 $209,120
=============================================================================================
</TABLE>
<TABLE>
<CAPTION>
Column A Column F Column G Column H Column I
-------- -------- -------- -------- --------
Life on
Which De-
preciation
Accumu- In 1997
lated Date of Income
Deprecia- Construc- Date Statement
Description tion (a) tion Acquired Is Computed
- ----------- --------- --------- -------- -----------
<S> <C> <C> <C> <C>
NationsBank Plaza
Atlanta, Georgia $33,621 1990-1992 1990 5-40
=======
</TABLE>
<TABLE>
<CAPTION>
NOTE: (a) Reconciliations of total real estate carrying value and accumulated
depreciation for the three years ended December 31, 1997 are as
follows:
Real Estate Accumulated Depreciation
-------------------------------- -------------------------------
1997 1996 1995 1997 1996 1995
-------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period $209,141 $208,676 $203,275 $27,621 $21,232 $14,980
Improvements and other capitalized costs 420 465 5,401 -- -- --
Write offs of improvements and other capitalized costs (441) -- -- (441) -- --
Provision for depreciation -- -- -- 6,441 6,389 6,252
-------------------------------- -------------------------------
Balance at close of period $209,120 $209,141 $208,676 $33,621 $27,621 $21,232
================================ ===============================
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT 11
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
COMPUTATION OF NET INCOME PER SHARE
FOR THE FIVE YEARS ENDED DECEMBER 31, 1997
($ in thousands, except per share amounts)
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
BASIC:
<S> <C> <C> <C> <C> <C>
Net income $ 37,277 $ 41,016 $ 26,342 $ 26,895 $ 11,965
Weighted average shares 29,267,239 28,520,178 27,983,180 27,844,341 22,781,485
Basic net income per share $ 1.27 $ 1.44 $ .94 $ .97 $ .53
DILUTED:
Net income $ 37,277 $ 41,016 $ 26,342 $ 26,895 $ 11,965
Dilutive potential common shares 425,504 218,194 163,413 103,604 106,595
Adjusted weighted average shares 29,692,743 28,738,372 28,146,593 27,947,945 22,888,080
Diluted net income per share $ 1.26 $ 1.43 $ .94 $ .96 $ .52
</TABLE>
Cousins Properties Incorporated and Consolidated Entities
FUNDS FROM OPERATIONS
- --------------------------------------------------------------------------------
The table below shows Funds From Operations ("FFO") for Cousins Properties
Incorporated and Consolidated Entities and its unconsolidated joint ventures. On
a consolidated basis, FFO includes the Company's FFO and the Company's share of
FFO of its unconsolidated joint ventures, but excludes the Company's share of
distributions from such ventures. The Company calculates its FFO using the
National Association of Real Estate Investment Trusts ("NAREIT") definition of
FFO adjusted to (i) eliminate the recognition of rental revenues on a
straight-line basis, (ii) reflect stock appreciation right expense on a cash
basis and (iii) recognize certain fee income as cash is received rather than
when recognized in the financial statements. The Company believes its FFO
presentation more properly reflects its operating results.
Management believes the Company's FFO is not directly comparable to other
REITs which own a portfolio of mature income-producing properties because the
Company develops projects through a development and lease-up phase before they
reach their targeted cash flow returns. Furthermore, the Company eliminates in
consolidation fee income for developing and leasing projects owned by
consolidated entities, while capitalizing related internal costs. In addition,
unlike many REITs, the Company has considerable land holdings which provide a
strong base for future FFO growth as land is developed or sold in future years.
Property taxes on the land, which are expensed currently, reduce current FFO.
As indicated above, the Company does not include straight-lined rents in
its FFO, as it could under the NAREIT definition of FFO. Furthermore, most of
the Company's leases are also escalated periodically based on the Consumer Price
Index, which unlike fixed escalations, do not require rent to be straight-lined;
under NAREIT's definition straight-lining of rents produces higher FFO in the
early years of a lease and lower FFO in the later years of a lease.
FFO is used by industry analysts as a supplemental measure of an equity
REIT's performance. FFO should not be considered an alternative to net income or
other measurements under generally accepted accounting principles as an
indicator of operating performance, or to cash flows from operating, investing,
or financing activities as a measure of liquidity.
<TABLE>
<CAPTION>
($ in thousands, except share
and per share amounts)
------------------------------
Years Ended December 31,
-------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Income before gain on sale of investment properties $31,305 $28,212 $24,480
Depreciation and amortization 24,397 17,256 13,381
Amortization of deferred financing costs and
depreciation of furniture, fixtures and equipment (452) (362) (592)
Elimination of the recognition of rental revenues on
a straight-line basis 998 (311) (1,053)
Adjustment to reflect stock appreciation right
expense on a cash basis (702) (567) 1,166
Deferred income received net of deferred
income recognized -- -- (1,127)
------- ------- -------
Consolidated Funds From Operations $55,546 $44,228 $36,255
======= ======= =======
Weighted Average Shares 29,267 28,520 27,983
======= ======= =======
Consolidated Funds From Operations Per Share - Basic $ 1.90 $ 1.55 $ 1.30
======= ======= =======
Adjusted Weighted Average Shares 29,693 28,738 28,146
======= ======= =======
Consolidated Funds From Operations Per Share - Diluted $ 1.87 $ 1.54 $ 1.29
======= ======= =======
</TABLE>
<PAGE>
Cousins Properties Incorporated and Consolidated Entities
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
($ in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
December 31,
------------------
1997 1996
------- --------
ASSETS
- ------
<S> <C> <C>
PROPERTIES (Notes 4 and 8):
Operating properties, net of accumulated depreciation of
$33,369 in 1997 and $20,339 in 1996 $318,901 $232,360
Land held for investment or future development 27,948 21,213
Projects under construction 54,778 88,568
Residential lots under development 14,942 15,183
------------------
Total properties 416,569 357,324
CASH AND CASH EQUIVALENTS, at cost, which approximates market 32,694 1,598
NOTES AND OTHER RECEIVABLES (Note 3) 38,464 56,497
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (Notes 4 and 5) 120,198 132,262
OTHER ASSETS 9,814 8,963
------------------
TOTAL ASSETS $617,739 $556,644
==================
LIABILITIES AND STOCKHOLDERS' INVESTMENT
- ----------------------------------------
NOTES PAYABLE (Note 4) $226,348 $231,831
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 20,332 25,302
DEPOSITS AND DEFERRED INCOME 385 327
------------------
TOTAL LIABILITIES 247,065 257,460
------------------
COMMITMENTS AND CONTINGENT LIABILITIES (Note 4)
STOCKHOLDERS' INVESTMENT (Note 6):
Common stock, $1 par value; authorized 50,000,000 shares,
issued 31,472,178 in 1997; and 28,920,122 in 1996 31,472 28,920
Additional paid-in capital 234,237 164,970
Cumulative undistributed net income 104,965 105,294
------------------
TOTAL STOCKHOLDERS' INVESTMENT 370,674 299,184
------------------
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $617,739 $556,644
==================
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
<PAGE>
Cousins Properties Incorporated and Consolidated Entities
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
($ in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------
1997 1996 1995
------- ------- -------
REVENUES:
<S> <C> <C> <C>
Rental property revenues (Note 10) $62,252 $33,112 $19,348
Development income 3,123 1,660 3,515
Management fees 3,448 2,801 2,213
Leasing and other fees 720 1,558 2,156
Residential lot and outparcel sales 12,847 14,145 9,040
Interest and other 3,609 5,256 4,764
---------------------------
85,999 58,532 41,036
---------------------------
INCOME FROM UNCONSOLIDATED JOINT VENTURES (Note 5) 15,461 17,204 14,113
---------------------------
COSTS AND EXPENSES:
Rental property operating expenses 15,371 7,616 4,681
General and administrative expenses 12,717 9,148 7,668
Depreciation and amortization 14,046 7,219 4,516
Stock appreciation right expense (Note 6) 204 2,154 1,298
Residential lot and outparcel cost of sales 11,917 13,676 8,407
Interest expense (Note 4) 14,126 6,546 687
Property taxes on undeveloped land 606 1,301 977
Other 2,695 1,567 1,688
---------------------------
71,682 49,227 29,922
---------------------------
INCOME FROM OPERATIONS BEFORE INCOME TAXES
AND GAIN ON SALE OF INVESTMENT PROPERTIES 29,778 26,509 25,227
PROVISION (BENEFIT) FOR INCOME TAXES FROM
OPERATIONS (Note 7) (1,527) (1,703) 747
---------------------------
INCOME BEFORE GAIN ON SALE OF INVESTMENT
PROPERTIES 31,305 28,212 24,480
---------------------------
GAIN ON SALE OF INVESTMENT PROPERTIES, NET OF
APPLICABLE INCOME TAX PROVISION (Note 7) 5,972 12,804 1,862
---------------------------
NET INCOME $37,277 $41,016 $26,342
===========================
WEIGHTED AVERAGE SHARES 29,267 28,520 27,983
===========================
BASIC NET INCOME PER SHARE $ 1.27 $ 1.44 $ .94
===========================
ADJUSTED WEIGHTED AVERAGE SHARES 29,693 28,738 28,146
===========================
DILUTED NET INCOME PER SHARE $ 1.26 $ 1.43 $ .94
===========================
CASH DIVIDENDS DECLARED PER SHARE (Note 6) $ 1.29 $ 1.12 $ .99
===========================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
Cousins Properties Incorporated and Consolidated Entities
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
Years Ended December 31, 1997, 1996 and 1995
($ in thousands)
<TABLE>
<CAPTION>
Additional Cumulative
Common Paid-In Undistributed
Stock Capital Net Income Total
------- ---------- ------------- -------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1994 $27,864 $147,495 $ 97,539 $272,898
Net income, 1995 -- -- 26,342 26,342
Common stock issued pursuant to:
Exercise of options and
director stock plan 42 638 -- 680
Dividend reinvestment plan 307 4,956 -- 5,263
Compensation paid in stock in
lieu of cash 10 176 -- 186
Dividends declared -- -- (27,691) (27,691)
---------------------------------------------
BALANCE, December 31, 1995 28,223 153,265 96,190 277,678
Net income, 1996 -- -- 41,016 41,016
Common stock issued pursuant to:
Exercise of options and
director stock plan 307 4,344 -- 4,651
Dividend reinvestment plan 390 7,361 -- 7,751
Dividends declared -- -- (31,912) (31,912)
---------------------------------------------
BALANCE, December 31, 1996 28,920 164,970 105,294 299,184
Net income, 1997 -- -- 37,277 37,277
Common stock issued pursuant to:
2,150,000 share stock offering,
net of expenses 2,150 61,993 -- 64,143
Exercise of options and
director stock plan 223 2,946 -- 3,169
Dividend reinvestment plan 179 4,328 -- 4,507
Dividends declared -- -- (37,606) (37,606)
---------------------------------------------
BALANCE, December 31, 1997 $31,472 $234,237 $104,965 $370,674
=============================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
Cousins Properties Incorporated and Consolidated Entities
CONSOLIDATED STATEMENTS OF CASH FLOWS (Note 9)
- --------------------------------------------------------------------------------
($ in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1997 1996 1995
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Income before gain on sale of investment properties $ 31,305 $ 28,212 $ 24,480
Adjustments to reconcile income before gain on sale of investment
properties to net cash provided by operating activities:
Depreciation and amortization, net of minority interests' share 14,046 7,219 4,340
Stock appreciation right expense 204 2,154 1,298
Cash charges to expense accrual for stock appreciation rights (906) (2,721) (132)
Effect of recognizing rental revenues on a straight-line basis (440) (4) (107)
Deferred income received -- -- 1,673
Deferred income recognized -- -- (2,800)
Income from unconsolidated joint ventures (15,461) (17,204) (14,113)
Operating distributions from unconsolidated joint ventures 21,707 19,382 15,786
Compensation paid in stock in lieu of cash -- -- 186
Residential lot and outparcel cost of sales 11,398 13,111 8,065
Changes in other operating assets and liabilities:
Change in other receivables 2,592 (3,420) (1,018)
Change in accounts payable and accrued liabilities (6,492) 10,375 62
------------------------------
Net cash provided by operating activities 57,953 57,104 37,720
------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Gain on sale of investment properties, net of applicable income tax provision 5,972 12,804 1,862
Adjustments to reconcile gain on sale of investment properties
to net cash provided by sales activities:
Cost of sales 17,041 26,252 2,869
Note received as sales consideration -- (365) (500)
Property acquisition and development expenditures (80,628) (162,154) (87,234)
Non-operating distributions from unconsolidated joint ventures 14,681 1,408 1,226
Investment in unconsolidated joint ventures, including interest
capitalized to equity investments (8,863) (268) (9,318)
Investment in notes receivable (5,593) (27,115) (18)
Collection of notes receivable 3,472 27,703 841
Change in other assets, net (1,645) (4,095) 905
Cash portion of exchange transaction -- 1,092 --
------------------------------
Net cash used in investing activities (55,563) (124,738) (89,367)
------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of line of credit (138,430) (87,627) (86,336)
Proceeds from line of credit 114,631 47,677 78,575
Common stock sold, net of expenses 71,795 12,074 5,848
Dividends paid (37,606) (31,912) (27,691)
Proceeds from other notes payable 25,000 131,844 80,116
Repayment of other notes payable (6,684) (4,376) (720)
------------------------------
Net cash provided by financing activities 28,706 67,680 49,792
------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 31,096 46 (1,855)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,598 1,552 3,407
------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 32,694 $ 1,598 $ 1,552
==============================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
Cousins Properties Incorporated and Consolidated Entities
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
December 31, 1997, 1996 and 1995
1. SIGNIFICANT ACCOUNTING POLICIES
Consolidation and Presentation:
The Consolidated Financial Statements include the accounts of Cousins
Properties Incorporated ("Cousins"), its majority owned partnerships and wholly
owned subsidiary, as well as Cousins Real Estate Corporation ("CREC") and its
subsidiaries. All of the entities included in the Consolidated Financial
Statements are hereinafter referred to collectively as the "Company." The
Company's investments in its non-majority owned joint ventures are recorded
using the equity method of accounting. However, the recognition of losses is
limited to the amount of direct or implied financial support. Information
regarding the non-majority owned joint ventures is included in Note 5.
Income Taxes:
Since 1987, Cousins has elected to be taxed as a real estate investment
trust ("REIT"). As a REIT, Cousins is not subject to corporate federal income
taxes to the extent that it distributes 100% of its taxable income (excluding
CREC's and its wholly owned subsidiaries' consolidated taxable income) to
stockholders, which is Cousins' current intention. The Company computes taxable
income on a basis different from that used for financial reporting purposes (see
Note 7). CREC and its wholly owned subsidiaries file a consolidated federal
income tax return.
Depreciation and Amortization:
Real estate assets are stated at depreciated cost. Buildings are
depreciated over 30 to 40 years. Buildings that were acquired are depreciated
over 15 and 25 years. Furniture, fixtures and equipment are depreciated over 3
to 15 years. Leasehold improvements and tenant improvements are amortized over
the life of the applicable leases or the estimated useful life of the assets,
whichever is shorter. Deferred expenses are amortized over the period of
estimated benefit. The straight-line method is used for all depreciation and
amortization.
Fee Income and Cost Capitalization:
Development, construction, management, and leasing fees received from
unconsolidated joint ventures are recognized as earned. A portion of these fees
may be capitalized by the joint ventures; however, the Company expenses salaries
and other direct costs related to this income. The Company classifies its share
of fee income earned by unconsolidated joint ventures as fee income rather than
joint venture income for those ventures where the related expense is borne
primarily by the Company rather than the venture.
Development, construction, and leasing fees between consolidated entities
are eliminated in consolidation. Costs related to planning, development, leasing
and construction of properties (including related general and administrative
expenses) are capitalized.
The table below shows the fees eliminated, the internal costs capitalized
related to these fees, and the additional internal costs capitalized by CREC to
its own residential developments ($ in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Fees eliminated in
consolidation $ 1,510 $ 3,400 $ 5,479
Internal costs capitalized
in consolidation to
projects on which
fees were eliminated $ 1,525 $ 2,135 $ 2,552
Internal costs capitalized
to CREC residential
developments $ 515 $ 500 $ 498
</TABLE>
Interest, real estate taxes, and rental revenues and expenses of properties
prior to the date they become operational for financial reporting purposes are
also capitalized. Interest is also capitalized to investments accounted for by
the equity method when the investee has property under development with a
carrying value in excess of the investee's borrowings. Deferred leasing and
other capitalized costs associated with a particular property are classified
with Properties in the Consolidated Balance Sheets.
Management fees received from consolidated entities are shown as a
reduction in rental property operating expenses.
Cash and Cash Equivalents:
Cash and cash equivalents include cash and highly liquid money market
instruments. Highly liquid money market instruments include securities and
repurchase agreements with original maturities of three months or less, money
market mutual funds, and securities on which the interest or dividend rate is
adjusted to market rate at least every three months. At December 31, 1997,
cash and cash equivalents included $1,087,000 which is restricted under a
municipal bond indenture.
Rental Property Revenues:
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
13, income on leases which include scheduled increases in rental rates over the
lease term (other than scheduled increases based on the Consumer Price Index) is
recognized on a straight-line basis.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Earnings Per Share:
The Company has adopted SFAS No. 128, "Earnings Per Share," which specifies
the computation, presentation and disclosure requirements for earnings per
share. The Company has disclosed both basic and diluted net income per share and
has restated all prior period amounts disclosed in accordance with SFAS No. 128.
Disclosure About Segments:
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131, "Disclosure About Segments of an Enterprise and Related Information."
This statement requires companies to identify segments based on how management
makes decisions about allocating resources to segments and measuring their
performance. The Company will adopt SFAS No. 131 in 1998 which will only affect
the Notes to Consolidated Financial Statements by the addition of disclosures
of the results of certain identified segments.
2. RELATIONSHIP WITH DEVELOPMENT AND LEASING ENTITY
CREC conducts certain development and leasing activities for real estate
projects. A wholly owned subsidiary of CREC, Cousins MarketCenters, Inc.
("CMC"), develops retail centers for the Company. CREC also manages a joint
venture property in which it has an ownership interest. At December 31, 1997,
1996 and 1995, Cousins owned 100% of CREC's $5,025,000 par value 8% cumulative
preferred stock and 100% of CREC's nonvoting common stock, which is entitled to
95% of any dividends of CREC after preferred dividend requirements. Thomas G.
Cousins, Chairman of the Board of Cousins, owns 100% of the voting common stock
of CREC, which voting common stock is entitled to 5% of any dividends of CREC
after preferred dividend requirements. CREC is included in the Company's
Consolidated Financial Statements, but is taxed as a regular corporation. CREC
has paid no common dividends to date, and for financial reporting purposes, none
of CREC's income is attributable to Mr. Cousins' minority interest because the
face amount of CREC's preferred stock plus accumulated dividends thereon
($9,045,000 in aggregate) exceeds CREC's $1,824,683 of equity.
3. NOTES AND OTHER RECEIVABLES
At December 31, 1997 and 1996, notes and other receivables included the
following ($ in thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
650 Massachusetts Avenue Mortgage Notes $25,961 $26,786
Wildwood Training Facility Mortgage Note -- 17,005
Daniel Realty Company Note Receivable 4,000 1,080
Miscellaneous Notes 776 903
Cumulative rental revenue recognized on a straight-
line basis in excess of revenue which accrued in
accordance with lease terms (see Note 1) 4,496 4,056
Other Receivables 3,231 6,667
-----------------
Total Notes and Other Receivables $38,464 $56,497
=================
</TABLE>
650 Massachusetts Avenue Mortgage Notes-On March 10, 1994, the Company
purchased from the Resolution Trust Corporation ("RTC") two notes aggregating
$37 million at a total cost of approximately $28 million. The two notes, which
resulted from the RTC's restructuring in December 1993 of a $53 million note,
are secured by a first deed of trust on an office building containing
approximately 250,000 square feet located at 650 Massachusetts Avenue, NW, in
Washington, D.C. The notes mature December 31, 2003, at which time their
unamortized balance will be a maximum of approximately $30.5 million. The notes
require minimum monthly payments totaling $2,818,000 annually, which through the
year 2000 are supported by a U.S. government agency lease. For financial
reporting purposes, the discounted notes are treated as non-amortizing notes to
the extent of the minimum required payments, with the minimum required payments
treated as interest income. Amounts in excess of the minimum required payments
($825,000 and $788,000 in 1997 and 1996, respectively) are treated as a
reduction of principal.
Wildwood Training Facility Mortgage Note - The Wildwood Training Facility
is owned by a limited partnership which leases the land under the facility from
the Company through November 30, 2013, with no renewal option, and owes the
Company $25.9 million on a note collateralized by the building located on the
land. The facility had been 100% leased to International Business Machines
Corporation ("IBM") through November 30, 1998. The IBM lease generated net cash
flow of approximately $2.4 million, of which all but $44,000 was paid to the
Company as payments on the mortgage note and ground lease, and for management
fees. At December 31, 1996, the land and the mortgage note (which for financial
reporting purposes was treated as an amortizing note even though it did not
actually amortize) were carried at $0 and $17,005,000, respectively, in the
accompanying financial statements.
Effective January 1, 1997, the IBM lease was extended eight years beyond
its previous expiration, to November 30, 2006. The amended lease will continue
to generate net cash flow of approximately $2.4 million through November 30,
1998, after which it will generate approximately $2.7 million through November
30, 2002, and $3.0 million through November 30, 2006. All but $44,000 will be
paid to the Company as payments on the mortgage note and ground lease and for
management fees through November 30, 1998, after which all but $54,000 will be
paid to the Company. The mortgage note payable to the Company is not expected to
amortize during this period.
Based on the above, the Company will receive substantially all of the
economic risks and rewards from the property through the term of the IBM lease.
In addition, the Company will receive substantially all of the future economic
risks and rewards from the property beyond the IBM lease because of the short
term remaining on the land lease (7 years) and the large mortgage note balance
($25.9 million) that would have to be paid off, with interest, in that 7 year
period before the limited partnership would receive any significant benefit.
Therefore, effective January 1, 1997, the $17,005,000 balance of the mortgage
note and land was reclassified to Operating Properties, and 1997 revenues and
expenses (including depreciation) have been recorded as if the building were
owned by the Company.
Daniel Realty Company Note Receivable - On December 27, 1996, the Company
entered into a venture with Daniel Realty Company ("Daniel"), a privately-held
real estate company headquartered in Birmingham, Alabama, which will focus on
the development and acquisition of commercial office properties. The arrangement
with Daniel includes a loan to Daniel of up to $9.5 million which had an
interest rate of 11%, required semiannual principal payments commencing February
1, 1998 and matured on December 31, 2003. The Company also obtained an option to
acquire certain segments of Daniel's business.
On December 31, 1997, upon paydown of the outstanding balance of the note
receivable to $4 million, the Company amended the note, which reduced the
interest rate to 9% and requires quarterly payments of principal and interest,
commencing April 1, 1998, in the amount of approximately $250,568. The loan will
fully amortize over 5 years.
Fair Value - The estimated fair value of the Company's $30.7 million and
$45.8 million of notes receivable at December 31, 1997 and 1996, respectively,
is $37.7 million and $51.9 million, respectively, calculated by discounting
future cash flows from the notes receivable at the estimated rates at which
similar loans would be made currently.
4. NOTES PAYABLE, COMMITMENTS, AND CONTINGENT LIABILITIES
At December 31, 1997 and 1996, the notes payable included the following ($
in thousands):
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
------------------------------------ -------------------------------------
Share of Share of
Unconsolidated Unconsolidated
Company Joint Ventures Total Company Joint Ventures Total
-------- -------------- -------- -------- --------------- --------
<S> <C> <C> <C> <C> <C> <C>
Floating Rate Lines of Credit $ -- $ -- $ -- $ 25,100 $ 2,025 $ 27,125
Other Debt (primarily non-recourse
fixed rate mortgages) 226,348 133,446 359,794 206,731 105,487 312,218
-----------------------------------------------------------------------------
$226,348 $133,446 $359,794 $231,831 $107,512 $339,343
=============================================================================
</TABLE>
The following table summarizes the terms of the debt outstanding at
December 31, 1997 ($ in thousands):
<TABLE>
<CAPTION>
Term/
Amortization Balance at
Period Final December 31,
Description Rate (Years) Maturity 1997
----------- ---------------- ------------- --------- ------------
Company Debt:
- -------------
<S> <C> <C> <C> <C>
Line of credit ($100 million maximum) unsecured Fed Funds + .88% 1/ N/A 6/29/98 $ --
Note secured by Company's interest in
CSC Associates, L.P. 6.677% 15/20 2/15/11 76,147
101 Independence Center mortgage note 8.22% 11/25 11/1/07 48,928
North Point MarketCenter mortgage note 8.50% 10/25 7/15/05 29,068
100/200 North Point Center East mortgage note 7.86% 10/25 8/1/07 24,893
Note secured by Company's interest in 650
Massachusetts Avenue mortgage notes (see Note 3) 6.53% 5/ N/A 10/01/00 24,224
Perimeter Expo mortgage note 8.04% 10/30 8/15/05 21,061
Other miscellaneous notes 0% to 9.4% Various Various 2,027
--------
226,348
--------
Share of Unconsolidated Joint Venture Debt:
- -------------------------------------------
Wildwood Associates:
Line of credit ($5 million maximum) Fed Funds + .75% 1/N/A 9/1/98 --
2300 Windy Ridge mortgage note 7.56% 10/25 12/01/05 34,998
3200 Windy Hill mortgage note 8.23% 10/28 1/1/07 34,695
4100/4300 Wildwood Parkway mortgage note 7.65% 15/25 4/1/12 14,848
2500 Windy Ridge mortgage note 7.45% 10/20 12/15/05 12,391
Cousins LORET Venture, L.L.C. mortgage note 7.90% 10/30 10/01/07 15,000
CC-JM II Associates mortgage note 7.00% 17/17 4/1/13 11,837
Ten Peachtree Place Associates mortgage note 8.00% 10/18 11/30/01 9,677
--------
133,446
--------
$359,794
========
</TABLE>
In 1996, CSC Associates, L.P. ("CSC") issued $80 million of 6.377%
collateralized non-recourse mortgage notes (the "Notes") secured by CSC's
interest in the NationsBank Plaza building and related leases and agreements.
CSC loaned the $80 million proceeds of the Notes to the Company under a
non-recourse loan (the "Cousins Loan") secured by the Company's interest in CSC
under the same payment terms as those of the Notes. The Company paid all costs
of issuing the Notes and the Cousins Loan, including a $400,000 fee to an
affiliate of NationsBank Corporation. In addition, the Company pays a fee to an
affiliate of NationsBank Corporation of .3% per annum of the outstanding
principal balance of the Notes. Because CSC has loaned the $80 million proceeds
of the Notes to the Company, the Notes and their related interest expense and
maturities are disclosed as an obligation of the Company and are not included in
the unconsolidated joint venture balances disclosed in the above table or in
Note 5. (The related note receivable and interest income are also not included
in Note 5.)
Effective June 30, 1997, the Company extended the maturity of its $100
million line of credit from June 30, 1997 to June 29, 1998. The line is
unsecured and bears interest tied to the Federal Funds rate. The Company had no
borrowings under the line as of December 31, 1997.
Three new financings were completed during 1997. On March 20, 1997,
Wildwood Associates completed the financing of the 4100 and 4300 Wildwood
Parkway Buildings with a $30 million non-recourse mortgage note payable at a
7.65% interest rate and maturity of April 1, 2012. On July 30, 1997, the Company
completed the financing of the 100 and 200 North Point Center East Buildings
with a $25 million non-recourse mortgage note payable at a 7.86% interest rate
and maturity of August 1, 2007. On September 30, 1997, Cousins LORET Venture,
L.L.C. completed the financing of Two Live Oak Center with a $30 million
non-recourse mortgage note payable at a 7.9% interest rate and a maturity of
October 1, 2007.
In November 1997, Cousins LORET Venture, L.L.C. received a commitment for
the financing of The Pinnacle office building which is expected to close in
March 1998 and will be drawn down as needed with the full amount funded by
December 1998. The $70 million non-recourse mortgage note payable has an
interest rate of 7.11% and term of twelve years.
The Wildwood Associates 2300 Windy Ridge, 3200 Windy Hill and 4100/4300
Wildwood Parkway mortgage notes and the CC-JM II Associates mortgage note
provide for additional amortization in the later years of the notes (over that
required by the amortization periods shown above) concurrent with scheduled rent
increases.
The Company has entered into an interest rate swap in order to hedge its
exposure to fluctuations in the interest rate on the note secured by the
Company's interest in the 650 Massachusetts Avenue mortgage notes. The note
actually floats at LIBOR + 1%, but as of January 10, 1996 was effectively fixed
at the 6.53% rate shown above. The difference between fixed and variable
interest amounts calculated by reference to the principal notional amount (which
was $23,700,000 at December 31, 1997) is recognized as an adjustment to interest
expense over the life of the swap. If the Company settled the swap as of
December 31, 1997, it would receive $176,000.
At December 31, 1997, the Company had outstanding letters of credit
totaling $1,831,000, and assets with carrying values of $271,473,000 and
$268,121,000 were pledged as security on the Company's and its unconsolidated
joint ventures' debt, respectively. The fixed rate long-term mortgage debt of
the Company and its unconsolidated joint ventures is non-recourse to the
Company.
As of December 31, 1997, the weighted average maturity of the Company's
debt, including its share of unconsolidated joint ventures, was 9 years.
The aggregate maturities of the indebtedness at December 31, 1997
summarized above are as follows ($ in thousands):
<TABLE>
<CAPTION>
Share of
Unconsolidated
Company Joint Ventures Total
-------- -------------- --------
<S> <C> <C> <C>
1998 $ 6,929 $ 2,878 $ 9,807
1999 6,790 3,118 9,908
2000 24,871 3,423 28,294
2001 4,943 11,427 16,370
2002 5,309 3,550 8,859
Thereafter 177,506 109,050 286,556
----------------------------------------------
$226,348 $133,446 $359,794
==============================================
</TABLE>
For each of the years ended December 31, 1997, 1996 and 1995, interest
expense was recorded as follows ($ in thousands):
<TABLE>
<CAPTION>
Share of Unconsolidated
Company Joint Ventures Total
------------------------------- ------------------------------- --------------------------------
Year Expensed Capitalized Total Expensed Capitalized Total Expensed Capitalized Total
- ---- -------- ----------- ------- -------- ----------- ------ -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $14,126 $3,167 $17,293 $8,281 $1,123 $9,404 $22,407 $4,290 $26,697
1996 6,546 5,648 12,194 6,599 557 7,156 13,145 6,205 19,350
1995 687 5,073 5,760 6,760 302 7,062 7,447 5,375 12,822
</TABLE>
The Company has future lease commitments under a land lease aggregating
$7.3 million over its remaining term of 71 years. Current annual lease payments
are approximately $63,000. The Company has entered into construction and design
contracts for real estate projects, of which approximately $17.4 million remains
committed at December 31, 1997. At December 31, 1997 the fair value of the
Company's notes payable was $238 million. At December 31, 1996, the carrying
value of the Company's notes payable approximates fair value.
5. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
The following information summarizes financial data and principal
activities of unconsolidated joint ventures in which the Company had ownership
interests ($ in thousands). Audited financial statements for Wildwood Associates
and CSC Associates, L.P. are included in the Company's Form 10-K.
<TABLE>
<CAPTION>
Company's
Total Assets Total Debt Total Equity Investment
-------------------- ------------------- ------------------- -------------------
1997 1996 1997 1996 1997 1996 1997 1996
-------- -------- --------- -------- -------- -------- -------- --------
SUMMARY OF FINANCIAL POSITION:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Wildwood Associates $261,828 $268,910 $193,861 $166,490 $ 60,464 $ 90,658 $(12,622) $ 2,476
CSC Associates, L.P. 194,982 201,166 -- -- 193,716 200,346 99,513 102,904
Ten Peachtree Place Associates 20,225 20,811 19,354 20,196 533 215 44 (4)
Haywood Mall 40,546 41,530 -- -- 39,643 40,941 20,626 20,743
Cousins LORET Venture, L.L.C. 68,820 -- 30,000 -- 50,214 -- 8,770 --
CC-JM II Associates 29,510 30,351 23,674 24,288 4,878 5,211 2,771 2,981
Norfolk Hotel Associates -- 8,283 -- 4,050 -- 4,182 -- 2,091
Other 2,433 2,365 -- -- 2,302 2,144 1,096 1,071
------------------- ------------------- ------------------- -------------------
$618,344 $573,416 $266,889 $215,024 $351,750 $343,697 $120,198 $132,262
=================== =================== =================== ===================
</TABLE>
<TABLE>
<CAPTION>
Company's Share
Total Revenues Net Income of Net Income
------------------------- ------------------------- -------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
------- ------- ------- ------- ------- ------- ------- ------- -------
SUMMARY OF OPERATIONS:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Wildwood Associates $39,115 $40,505 $37,767 $ 3,806 $ 8,490 $ 5,884 $ 1,903 $ 4,245 $ 2,942
CSC Associates, L.P. 35,159 33,312 31,195 18,720 16,108 14,697 9,284 7,978 7,308
Ten Peachtree Place Associates 4,295 4,284 4,276 718 632 523 248 235 236
Haywood Mall 13,820 13,527 11,269 7,382 7,120 5,926 3,648 3,538 2,963
Cousins LORET Venture, L.L.C. 1,885 -- -- 135 -- -- 68 -- --
CC-JM II Associates 3,860 3,489 -- 261 316 -- 113 141 --
Norfolk Hotel Associates 214 820 804 180 552 486 90 276 243
Other 329 2,018 1,504 215 1,586 846 107 791 421
------------------------- ------------------------- -------------------------
$98,677 $97,955 $86,815 $31,417 $34,804 $28,362 $15,461 $17,204 $14,113
========================= ========================= =========================
</TABLE>
<TABLE>
<CAPTION>
Company's Share Of
-----------------------------------------------------
Cash Flows From Cash Flows From Operating
Operating Activities Operating Activities Cash Distributions
------------------------- ------------------------- -------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
------- ------- ------- ------- ------- ------- ------- ------- -------
SUMMARY OF OPERATING CASH FLOWS:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Wildwood Associates $15,789 $20,278 $12,812 $ 7,894 $10,139 $ 6,406 $ 4,500 $ 4,000 $ 4,000
CSC Associates, L.P. 26,381 20,394 22,366 13,191 10,197 11,219 12,675 9,850 7,771
Ten Peachtree Place Associates 1,205 1,360 1,100 321 344 305 200 200 200
Haywood Mall 9,795 7,877 3,502 4,897 3,939 1,751 3,895 4,990 3,349
Cousins LORET Venture, L.L.C. 768 -- -- 384 -- -- -- -- --
CC-JM II Associates 1,222 (1,655) -- 611 (828) -- 324 162 --
Norfolk Hotel Associates 132 428 338 66 214 169 -- -- --
Other 235 1,378 843 118 689 422 113 180 466
------------------------- ------------------------- -------------------------
$55,527 $50,060 $40,961 $27,482 $24,694 $20,272 $21,707 $19,382 $15,786
========================= ========================= =========================
</TABLE>
Wildwood Associates - Wildwood Associates was formed in 1985 between the
Company and IBM, each as 50% partners. The partnership owns six office buildings
totaling 2.1 million rentable square feet, other income-producing commercial
properties, and additional developable land in Wildwood Office Park ("Wildwood")
in Atlanta, Georgia. Wildwood is an office park containing a total of
approximately 289 acres, of which approximately 94 acres are owned by Wildwood
Associates and an estimated 15 acres are committed to be contributed to Wildwood
Associates by the Company; the Company owns the balance of the developable
acreage in the office park. The 15 acres of land which are committed to be
contributed to Wildwood Associates by the Company are included in Wildwood
Associates' financial statements under the caption "Land Committed to be
Contributed" and are not included in "Land Held for Investment or Future
Development" in the Company's financial statements. All costs associated with
the land are borne by Wildwood Associates.
Effective December 1, 1996, Wildwood Associates disposed of its interest in
an office building at Summit Green in exchange for cancellation of the related
mortgage debt. Summit Green is an office project situated on 21 acres of leased
land in Greensboro, North Carolina and includes sites for two additional
buildings. In connection with the office building disposition, Wildwood
Associates and a related partnership also may dispose of a leasehold interest in
the sites for the two additional buildings. No material gain or loss is
anticipated to result from the disposition of the Summit Green project.
Through December 31, 1997, IBM had contributed $46.6 million in cash plus
properties having an agreed value of $16.3 million for its one-half interest in
Wildwood Associates. The Company has contributed $84,000 in cash plus properties
having an agreed value of $49.3 million for its one-half interest in the
partnership, and is obligated to contribute the aforesaid estimated 15 acres of
additional land with an agreed value of $13.5 million. The Company and IBM each
lease office space from the partnership at rates comparable to those charged to
third parties.
On March 20, 1997, Wildwood Associates completed the $30 million financing
of the 4100 and 4300 Wildwood Parkway Buildings (see Note 4). In conjunction
with this financing and a portion of the $70 million financing of the 3200 Windy
Hill Road Building completed in December 1996, during the first quarter of 1997,
Wildwood Associates made non-operating cash distributions of $12.5 million to
each partner and paid the entire calendar year 1997 operating distribution of
$4.5 million to each partner.
The Company's investment as recorded in the Consolidated Balance Sheets,
which was reduced to a negative investment of $12.6 million at December 31, 1997
due to the aforementioned partnership distributions, is based upon the Company's
historical cost of the properties at the time they were contributed or committed
to be contributed to the partnership, whereas its investment as recorded on
Wildwood Associates' books ($30.2 million at December 31, 1997) is based upon
the agreed values at the time the partnership was formed.
CSC Associates, L.P. ("CSC") - CSC was formed in 1989 between the Company
and a wholly owned subsidiary of NationsBank Corporation, each as 50% partners.
CSC owns the 1.3 million rentable square foot NationsBank Plaza in Atlanta,
Georgia.
CSC's net income or loss and cash distributions are allocated to the
partners based on their percentage interests (50% each). See Note 4 for a
discussion of the presentation of certain CSC assets, liabilities and revenues.
Ten Peachtree Place Associates ("TPPA") - TPPA is a general partnership
between the Company (50%) and a wholly owned subsidiary of The Coca-Cola Company
("Coca-Cola") (50%). The venture owns Ten Peachtree Place, a 259,000 rentable
square foot building located in midtown Atlanta, Georgia. The building is 100%
leased to Coca-Cola through November 30, 2001.
The TPPA partnership agreement generally provides that each of the partners
is entitled to receive 50% of cash flows from operating activities net of note
principal amortization through the term of the Coca-Cola lease, after which the
Company and its partner are entitled to receive 15% and 85% of the cash flows
(including any sales proceeds), respectively, until the two partners have
received a combined distribution of $15.3 million. Thereafter, each partner is
entitled to receive 50% of cash flows.
Haywood Mall - Haywood Mall, a regional shopping center on 86 acres 5 miles
southeast of downtown Greenville, South Carolina, is owned by the Company and an
affiliate of Corporate Property Investors. The mall has 1,256,000 gross
leaseable square feet ("GLA") (of which approximately 330,000 GLA is owned). The
balance of the mall is owned by the mall's five major department stores.
Cousins LORET Venture, L.L.C. Effective July 31, 1997, Cousins LORET
Venture, L.L.C. ("the Venture") was formed between the Company and LORET
Holdings, L.L.L.P. ("LORET"), each as 50% members. LORET contributed Two Live
Oak Center, a 278,000 rentable square foot office building located in Atlanta,
Georgia, which was recently renovated and is in the process of being leased up.
Two Live Oak Center became partially operational for financial reporting
purposes in October 1997. LORET also contributed an adjacent 4 acre site on
which construction commenced in August 1997 on The Pinnacle, a 424,000 rentable
square foot office building. Two Live Oak Center was contributed subject to a
7.90% $30 million non-recourse ten year mortgage note payable (see Note 4). The
Company is obligated to contribute $25 million of cash to the Venture to match
the value of LORET's agreed-upon equity, which cash is to be contributed as
needed for the development of The Pinnacle. As of December 31, 1997, the Company
had contributed $8.5 million of its $25 million obligation.
Norfolk Hotel Associates ("NHA") - NHA was a partnership between the
Company and an affiliate of Odyssey Partners, L.P., each as 50% partners, which
held a mortgage note on and owned the land under the Omni International Hotel in
Norfolk, Virginia. In January 1992, NHA terminated the land lease and became the
owner of the hotel and a long-term parking agreement with an adjacent building
owner. In April 1993, the partnership sold the hotel, but retained its interest
in the parking agreement. The partnership received a mortgage note receivable
for a portion of the sales proceeds. In July 1994, NHA distributed to each
partner a 50% interest in the parking agreement held by NHA, and in July 1996
the Company sold its 50% interest for $2 million, resulting in a profit to the
Company of approximately $408,000 which is included in Gain on Sale of
Investment Properties in the accompanying Consolidated Statements of Income.
On February 14, 1997, the mortgage note receivable due to NHA with a
balance of $8,325,000 was repaid in full. A portion of the proceeds from the
repayment was used to pay off the partnership's lines of credit, with
substantially all of the balance of the partnership's assets ($2.2 million of
cash for each partner) distributed to the partners in 1997.
The partnership was dissolved in 1997.
CC-JM II Associates - This joint venture was formed in 1994 between the
Company and an affiliate of CarrAmerica Realty Corporation, each as 50% general
partners, to develop and own a 224,000 rentable square foot office building in
suburban Washington, D.C. The building is 100% leased until January 2011 to
Booz-Allen & Hamilton, an international consulting firm, as a part of its
corporate headquarters campus. Rent commenced on January 21, 1996.
Other - This category consists of several other joint ventures including:
Cousins-Hines Partnerships - Through the Cousins-Hines partnerships, CREC
effectively owns 9.8% of the One Ninety One Peachtree Tower in Atlanta, Georgia,
subject to a preference in favor of the majority partner. This 1.2 million
rentable square foot office building, which opened in December 1990, was
developed in partnership with the Hines Interests Limited Partnership and the
Dutch Institutional Holding Company ("DIHC"). In October 1997, Cornerstone
Properties, Inc. purchased DIHC's interest in the partnership. Because CREC's
effective ownership of this building is less than 20%, the Company accounts for
its investment using the cost method of accounting, and therefore the above
tables do not include the Company's share of One Ninety One Peachtree Tower.
Temco Associates - Temco Associates was formed in 1991 as a partnership
between the Company (50%) and a subsidiary of Temple-Inland Inc. (50%). Temco
Associates has an option through March 2006, with no carrying costs, to acquire
the fee simple interest in approximately 11,300 acres in Paulding County,
Georgia (northwest of Atlanta, Georgia). The partnership also has an option to
acquire a timber rights interest only in approximately 22,000 acres. The options
may be exercised in whole or in part over the option period, and the option
price of the fee simple land was $827 per acre at January 1, 1998, escalating at
6% on January 1 of each succeeding year during the term of the option. During
1996, approximately 375 acres of the option related to the fee simple interest
was exercised and simultaneously sold for gross profits of approximately
$1,427,000. None of the option was exercised in 1995 and 1997.
Dusseldorf Joint Venture - In 1992, the Company entered into a joint
venture agreement for the development of a 133,000 rentable square foot office
building in Dusseldorf, Germany which is 34% leased to IBM. Cousins' venture
partners are IBM and Multi Development Corporation International B.V. ("Multi"),
a Dutch real estate development company. In December 1993, the building was
presold to an affiliate of Deutsche Bank. CREC and Multi jointly developed the
building. Due to the release of certain completion guarantees related to the
building, approximately $2.6 million of development income was recognized in
September 1995 ($931,000 of which had been deferred as of December 31, 1994). An
additional $235,000 and $777,000 of development income was received and
recognized in 1997 and 1996, respectively.
Additional Information - The Company recognized $4,398,000, $4,926,000 and
$5,780,000 of development, construction, leasing, and management fees from
unconsolidated joint ventures in 1997, 1996 and 1995, respectively.
6. STOCKHOLDERS' INVESTMENT
Common Stock Issuance:
In December 1997, the Company issued 2,150,000 shares of common stock
through a public offering at a price of $31.5625 per share. The Company has used
the proceeds to reduce debt and develop income-producing properties.
General:
The Company has elected to account for its stock-based compensation plans
under APB Opinion No. 25, "Accounting for Stock Issued to Employees," which
requires the recording of compensation expense for some, but not all,
stock-based compensation, rather than the alternative accounting permitted by
SFAS No. 123, "Accounting for Stock-Based Compensation". Had compensation cost
for stock-based compensation plans been determined consistent with SFAS No. 123,
the Company's earnings and earnings per share would have been as disclosed
below. Options and Stock Appreciation Rights:
The Company has a key employee stock incentive plan and an outside director
stock plan which provide for the granting of both stock and stock option awards
(see also "Stock Grants" below). Under both plans, stock options have been
granted for a term of 10 years, and the vesting period for all options
outstanding is 5 years and 1 year under the key employee and outside director
plans, respectively.
At December 31, 1997, 1,841,070 stock options to key employees and outside
directors were outstanding, and the Company is authorized to award an additional
529,357 stock options or shares of stock. Prior to 1991, the Company included a
provision in each key employee stock option agreement to allow the option holder
to surrender options and request a cash payment for the difference between the
fair market value of the shares at the date of surrender and the option price;
all of those options were exercised prior to December 31, 1997.
Separately from the stock incentive plan, the Company has issued stock
appreciation rights ("SARs") to certain employees under two plans. At December
31, 1997, 120,600 SARs were outstanding, and the Company is authorized to award
an additional 1,110,354 SARs.
The Company accounts for stock options which have a cash payment election
option as SARs. Accordingly, included in the Consolidated Statements of Income
under the heading "stock appreciation right expense" are increases or reductions
in accrued compensation expense to reflect the issuance of new SARs, vesting,
changes in the market value of the common stock between periods, and forfeiture
of non-vested SARs of terminated employees.
<PAGE>
The following is a summary of stock option activity under the stock option
plans and SAR plans (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Number of Weighted Average
Shares Exercise Price Per Share
--------------------------- ------------------------------
1997 1996 1995 1997 1996 1995
---- ---- ---- ------ ------ ------
Stock Option Plans
- ------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of year 1,507 1,413 1,184 $17.95 $15.42 $14.74
Granted 580 436 300 $30.15 $22.75 $18.00
Exercised (231) (340) (42) $14.67 $13.61 $13.30
Forfeited (15) (2) (29) $19.01 $16.77 $16.99
---------------------------
Outstanding, end of year 1,841 1,507 1,413 $22.23 $17.95 $15.42
===========================
Shares exercisable at end of year 630 601 805 $17.04 $15.29 $13.68
===========================
SARs
Outstanding, beginning of year 184 344 369 $14.74 $13.21 $13.21
Granted -- -- -- -- -- --
Exercised (62) (159) (23) $14.09 $11.44 $13.03
Forfeited (1) (1) (2) $16.88 $13.59 $13.91
---------------------------
Outstanding, end of year 121 184 344 $15.05 $14.74 $13.21
===========================
Shares exercisable at end of year 103 145 272 $14.74 $14.21 $12.44
===========================
</TABLE>
The following table provides a breakdown by exercise price range of the
number of shares, weighted average exercise price, and remaining contractual
lives for all stock options and SARs outstanding at December 31, 1997 (in
thousands, except per share amounts and option life):
<TABLE>
<CAPTION>
For Outstanding Options/SARs
----------------------------
Exercise Weighted Weighted Average
Price Average Contractual Life
Range Outstanding Exercisable Price (in years)
-------- ----------- ----------- -------- ----------------
Stock Option Plans
- ------------------
<S> <C> <C> <C> <C>
$13.25 to $16.30 547 422 $15.61 5.6
$16.31 to $23.00 714 205 $20.85 8.5
$23.01 to $30.25 580 3 $30.15 9.9
-------------------------------------------
Total 1,841 630 $22.23 8.1
===========================================
SARs
- ----
$10.78 to $13.75 46 46 $12.85 3.4
$13.76 to $16.875 75 57 $16.40 5.0
-------------------------------------------
Total 121 103 $15.05 4.4
===========================================
</TABLE>
At December 31, 1997 and 1996, the total amount accrued for stock options,
SARs, and Deferred Payment Agreements was $1,746,000 and $2,472,000,
respectively.
Stock Grants:
As indicated above the key employee stock incentive plan and the outside
director stock plan provide for stock awards in addition to stock option awards.
The stock awards may be subject to specified performance and vesting
requirements. Under the outside director stock plan, since April 1995 a director
could elect to receive any portion of his director fees in stock, and since May
1996 the amount of stock received has been based on 95% of the market price.
As of December 31, 1997, 110,400 shares of common stock have been awarded
under the key employee stock incentive plan, of which 10,400 shares were awarded
in lieu of 1995 cash bonuses, and 100,000 shares were awarded in 1995 subject to
specified performance and vesting requirements. The estimated cost of the
100,000 shares, which will not be issued until all requirements have been met,
is being accrued over the five year performance and vesting period, and at
December 31, 1997 and 1996, $1,242,000 and $654,000 was accrued, respectively.
Outside directors elected to receive 4,638, 2,260 and 307 shares of stock in
lieu of cash for director fees in 1997, 1996 and 1995, respectively.
SFAS No. 123 Pro Forma Disclosures:
For purposes of the pro forma disclosures required by SFAS No. 123, the
Company has computed the value of all stock and stock options awards granted
during 1997, 1996 and 1995 using the Black-Scholes option pricing model with the
following weighted-average assumptions and results:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
Assumptions
- -----------
<S> <C> <C> <C>
Risk-free interest rate 5.93% 6.26% 5.94%
Assumed dividend yield 4.80% 5.34% 6.00%
Assumed lives of option
awards 8 years 8 years 8 years
Assumed volatility 0.202 0.171 0.173
Results
Weighted average
fair value of
options granted $ 5.12 $ 3.08 $ 1.98
</TABLE>
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions. In the Company's opinion, because the
Company's stock-based compensation awards have characteristics significantly
different from traded options, and because changes in the subjective assumptions
can materially affect the fair value estimate, the results obtained from the
valuation model do not necessarily provide a reliable single measure of the
value of its stock-based compensation awards.
If the Company had accounted for its stock-based compensation awards in
1997, 1996 and 1995 in accordance with SFAS No. 123, pro forma results would
have been as follows ($ in thousands, except per share amounts):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Pro forma net income $36,769 $40,978 $26,297
Pro forma basic net
income per share $ 1.26 $ 1.44 $ .94
Pro forma diluted net
income per share $ 1.24 $ 1.43 $ .93
</TABLE>
Because the SFAS No. 123 method of accounting has not been applied to
awards granted prior to January 1, 1995, the pro forma compensation adjustments
used to derive the above results are not likely to be representative of the pro
forma compensation adjustments to be reported in future years.
<TABLE>
<CAPTION>
Per Share Data:
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Weighted average shares 29,267 28,520 27,983
Dilutive potential common shares 426 218 163
Adjusted weighted average shares 29,693 28,738 28,146
Anti-dilutive options not included 565 -- --
</TABLE>
Ownership Limitations:
In order to maintain Cousins' qualification as a REIT, Cousins' Articles of
Incorporation include certain restrictions on the ownership of more than 3.9% of
the Company's common stock.
Distribution of REIT Taxable Income:
The following is a reconciliation between dividends declared and dividends
applied in 1996 and 1995 and estimated to be applied in 1997 to meet REIT
distribution requirements ($ in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Dividends declared $37,606 $31,912 $27,691
Additional dividends paid deduction due to 5% discount on
dividends reinvested 236 408 277
That portion of dividends declared in current year, and paid in current
year, which was applied to the prior year distribution requirements (4,816) (2,197) (3,048)
That portion of dividends declared in subsequent year, and paid in
subsequent year, which will apply to current year 9,789 4,816 2,197
---------------------------
Dividends applied to meet current year REIT distribution requirements $42,815 $34,939 $27,117
===========================
</TABLE>
Tax Status of Dividends:
Dividends applied to meet REIT distribution requirements were equal to
Cousins' taxable income (see Note 7). Since electing to qualify as a REIT in
1987, Cousins has had no accumulated undistributed taxable income.
In 1997, the Company designated as 28% capital gain dividends 49% of the
dividend paid February 10, 1997. In 1996, the Company designated as capital gain
dividends 16.778% of the dividend paid February 22, 1996 and 30.6774% of the
dividend paid December 23, 1996. In 1995, the Company designated as capital gain
dividends 2.4815% of the dividend paid December 21, 1995. All other dividends
paid in 1995 and 1997 were taxable as ordinary dividends. In addition, in 1997,
1996 and 1995 an amount calculated as 1.91%, 1.95% and 3.25% of total dividends,
respectively, was an "adjustment attributed to depreciation of tangible property
placed in service after 1986" for alternative minimum tax purposes. This amount
was passed through to stockholders and must be used as an item of adjustment in
determining each stockholder's alternative minimum taxable income.
7. INCOME TAXES
In 1997, 1996 and 1995, because Cousins qualified as a REIT and distributed
all of its taxable income (see Note 6), it incurred no federal income tax
liability. The differences between taxable income as reported on Cousins' tax
return (estimated 1997 and actual 1996 and 1995) and Consolidated Net Income as
reported herein are as follows ($ in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Consolidated net income $37,277 $41,016 $26,342
Consolidating adjustments (1,218) (3,868) 348
Less CREC net (income) loss (482) 2,937 (1,652)
-----------------------------
Cousins net income for financial reporting purposes 35,577 40,085 25,038
Adjustments arising from:
Sales of investment properties 1,615 (8,844) (1,633)
Income from unconsolidated joint ventures (principally depreciation,
revenue recognition, and operational timing differences) 1,770 (489) (1,891)
Rental income recognition (440) 73 (130)
-
Interest income recognition 554 448 305
Wildwood Training Facility differences -- 411 375
Interest expense 1,600 2,356 2,830
Compensation expense under stock option and SAR plans (2,578) (2,893) 312
Depreciation 4,697 1,170 245
Other 20 2,622 1,666
------------------------------
Cousins taxable income $ 42,815 $ 34,939 $ 27,117
==============================
</TABLE>
The consolidated provision (benefit) for income taxes is composed of the
following ($ in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
CREC and its wholly owned subsidiaries:
Currently payable:
<S> <C> <C> <C>
Federal $ 46 $ -- $ --
State -- -- --
-----------------------------
46 -- --
-----------------------------
Adjustments arising from:
Income from unconsolidated joint ventures 304 298 171
Operating loss carryforward 751 (1,133) 914
Stock appreciation right expense 119 (185) (324)
Fee income -- -- 354
Other (922) (776) (49)
-----------------------------
252 (1,796) 1,066
-----------------------------
CREC provision (benefit) for income taxes 298 (1,796) 1,066
Cousins provision (benefit) for state income taxes 72 680 (228)
Less provision applicable to gain on sale of investment properties (1,897) (587) (91)
-----------------------------
Consolidated provision (benefit) applicable to income from operations $(1,527) $(1,703) $ 747
=============================
</TABLE>
The Cousins provision (benefit) for state income taxes in 1995 is net of
$252,000 of state income tax refunds related to a successful judicial appeal by
Cousins of an assessment paid in 1992.
The net income tax provision (benefit) differs from the amount computed by
applying the statutory federal income tax rate to CREC's income (loss) before
taxes as follows ($ in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
--------------- ---------------- ---------------
Amount Rate Amount Rate Amount Rate
------ ---- ------- ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Federal income tax provision (benefit) $ 265 34% $(1,609) 34% $ 924 34%
State income tax provision (benefit), net of
federal income tax effect 31 4 (189) 4 109 4
Other 2 -- 2 -- 33 1
------------------------------------------------------
CREC provision (benefit) for income taxes 298 38% (1,796) 38% 1,066 39%
--- --- ---
Cousins provision (benefit) for income taxes 72 680 (228)
Less provision applicable to gain on sale of
investment properties (1,897) (587) (91)
------- ------ ------
Consolidated provision (benefit) applicable to income
from operations $(1,527) $(1,703) $ 747
======= ======= ======
</TABLE>
The components of CREC's net deferred tax liability are as follows ($ in
thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Deferred tax assets $ 4,244 $ 3,684
Deferred tax liabilities (4,961) (4,148)
--------------------
Net deferred tax liability $ (717) $ (464)
===================
</TABLE>
The tax effect of significant temporary differences representing CREC's
deferred tax assets and liabilities are as follows ($ in thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Operating loss carryforward $ 2,258 $ 1,749
Income from unconsolidated
joint ventures (3,872) (3,485)
Stock appreciation right expense 821 939
Other 76 333
-------------------
$ (717) $ (464)
===================
</TABLE>
8. PROPERTY TRANSACTIONS
Retail Properties
In January 1997, the Company purchased the land for, and commenced
construction of Abbotts Bridge Station, an approximately 83,000 square foot
neighborhood retail center in suburban Atlanta, Georgia. In August 1997, the
Company purchased the land for, and commenced construction of Laguna Niguel
Promenade, an approximately 153,000 square foot retail center in Laguna Niguel,
California.
On July 1, 1997, CREC sold Rivermont Station and Lovejoy Station, two
Atlanta neighborhood retail centers with 90,000 and 77,000 square feet,
respectively, for $20.1 million, which was approximately $4.0 million over the
cost of the centers. Including depreciation recapture of approximately $.5
million and net of an income tax provision of approximately $1.5 million, the
net gain on the sale was approximately $3.0 million.
Subsequent to year-end, in February 1998, the Company purchased The Shops
at Palos Verdes, located in Rolling Hills Estates, California, in the greater
Los Angeles metropolitan area. This 355,000 square foot center includes existing
retail space and a parking deck. The Company plans to reposition and
remerchandise the project into an approximately 380,000 square foot open-air,
high-end specialty center.
Office Properties
In April 1997, the Company purchased the land on which construction
commenced on Grandview II, a 150,000 rentable square foot office building in
Birmingham, Alabama.
Two Live Oak Center, a 278,000 rentable square foot office building located
in Atlanta, Georgia owned by Cousins LORET Venture, L.L.C. became partially
operational for financial reporting purposes in October 1997. In August 1997,
Cousins LORET Venture, L.L.C. commenced construction on The Pinnacle, a 424,000
rentable square foot office building located adjacent to Two Live Oak Center
(see Note 5).
In November 1997, the Company purchased approximately .6 acres of
undeveloped land in downtown San Francisco, California which is entitled for an
approximately 381,000 rentable square foot office building. The Company is
currently pursuing predevelopment and investigative work to confirm the
feasibility of developing this office building. Subsequent to year-end, in
January 1998, the Company purchased the land for, and commenced construction on
Carlyle I, an approximately 150,000 square foot office building in Alexandria,
Virginia.
Medical Office Properties
In August 1997, Presbyterian Medical Plaza at University, a 69,000 rentable
square foot medical office building became partially operational for financial
reporting purposes. In September 1997, the Company commenced construction on
Meridian Mark Plaza, a 159,000 rentable square foot medical office building
located in Atlanta, Georgia.
Residential Lots
The Company is currently developing six residential communities in suburban
Atlanta, including four in which development commenced in 1994, one in 1995 and
one in 1996. These developments currently include land on which approximately
1,726 lots are being developed (with additional lots developable on adjacent
land under option), of which 260, 227 and 183 lots were sold in 1997, 1996 and
1995, respectively. 9. CONSOLIDATED STATEMENTS OF CASH FLOWS - SUPPLEMENTAL
INFORMATION
Interest (net of amounts capitalized) (see Note 4) and income taxes paid
(net of refunds) were as follows ($ in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------ -----
<S> <C> <C> <C>
Interest paid $14,118 $5,753 $ 846
Income taxes paid
(refunded), net of $511
and $252 refunded
1996 and 1995,
respectively $ 46 $ 54 $ 376
</TABLE>
Significant non-cash financing and investing activities included the
following:
a. In 1997, 1996 and 1995, approximately $87,658,000, $78,169,000 and,
$2,860,000 respectively, were transferred from Projects Under Construction to
Operating Properties.
b. In 1997 and 1996, approximately $1,553,000 and $3,246,000 were
transferred from Land Held for Investment or Future Development to Operating
Properties. In 1995, approximately $2,970,000 was transferred from Land Held for
Investment or Future Development to Projects Under Construction.
c. In January 1997, approximately $17,005,000 was transferred from Notes
and Other Receivables to Operating Properties (see Note 3).
d. In December 1996, in conjunction with the acquisition of 101
Independence Center a mortgage note payable of approximately $30,879,000 was
assumed.
e. In January 1996, in conjunction with the exchange of certain partnership
interests approximately $3,825,000 was transferred from Minority Interests in
Consolidated Entities to Operating Properties ($3,283,000) and Projects Under
Construction ($542,000); and approximately $1,688,000 was transferred from
Investment in Unconsolidated Joint Ventures to Operating Properties.
10. RENTAL PROPERTY REVENUES
The Company's leases typically contain escalation provisions and provisions
requiring tenants to pay a pro rata share of operating expenses. The leases
typically include renewal options and all are classified and accounted for as
operating leases.
At December 31, 1997, future minimum rentals to be received by consolidated
entities under existing non-cancelable leases, excluding tenants' current pro
rata share of operating expenses, are as follows ($ in thousands):
<TABLE>
<CAPTION>
Office
and
Medical
Retail Office Total
-------- -------- --------
<S> <C> <C> <C>
1998 $ 27,643 $ 33,469 $ 61,112
1999 27,736 32,400 60,136
2000 27,029 26,638 53,667
2001 26,738 20,119 46,857
2002 25,328 14,732 40,060
Subsequent to 2002 257,426 76,568 333,994
--------------------------------
$391,900 $203,926 $595,826
================================
</TABLE>
<PAGE>
Cousins Properties Incorporated and Consolidated Entities
- --------------------------------------------------------------------------------
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
($ in thousands, except per share amounts)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Rental property revenues $ 62,252 $ 33,112 $ 19,348 $ 13,150 $ 6,687
Fees 7,291 6,019 7,884 5,023 5,903
Residential lot and outparcel sales 12,847 14,145 9,040 6,132 --
Interest and other 3,609 5,256 4,764 6,801 6,456
-------------------------------------------------------------------
Total revenues 85,999 58,532 41,036 31,106 19,046
-------------------------------------------------------------------
Income from unconsolidated joint ventures 15,461 17,204 14,113 12,580 5,516
-------------------------------------------------------------------
Rental property operating expenses 15,371 7,616 4,681 3,338 2,310
Depreciation and amortization 14,046 7,219 4,516 3,742 3,164
Stock appreciation right expense 204 2,154 1,298 433 721
Residential lot and outparcel cost of sales 11,917 13,676 8,407 5,762 --
Interest expense 14,126 6,546 687 411 --
General, administrative, and other expenses 16,018 12,016 10,333 9,627 9,124
-------------------------------------------------------------------
Total expenses 71,682 49,227 29,922 23,313 15,319
Provision (benefit) for income taxes
from operations (1,527) (1,703) 747 (166) (795)
Gain on sale of investment properties,
net of applicable income tax provision 5,972 12,804 1,862 6,356 1,927
-------------------------------------------------------------------
Net income $ 37,277 $ 41,016 $ 26,342 $ 26,895 $ 11,965
===================================================================
Basic net income per share $ 1.27 $ 1.44 $ .94 $ .97 $ .53
===================================================================
Diluted net income per share $ 1.26 $ 1.43 $ .94 $ .96 $ .52
===================================================================
Cash dividends declared per share $ 1.29 $ 1.12 $ .99 $ .90 $ .73
===================================================================
Total assets $617,739 $556,644 $418,006 $330,817 $319,702
Notes payable 226,348 231,831 113,434 41,799 35,151
Stockholders' investment 370,674 299,184 277,678 272,898 270,557
Shares outstanding at year-end 31,472 28,920 28,223 27,864 27,831
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
<PAGE>
To the Stockholders of Cousins Properties Incorporated:
We have audited the accompanying consolidated balance sheets of Cousins
Properties Incorporated (a Georgia corporation) and consolidated entities as of
December 31, 1997 and 1996, and the related consolidated statements of income,
stockholders' investment and cash flows for each of the three years in the
period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We did not audit the
financial statements of CSC Associates, L.P. and Haywood Mall which statements
combined reflect assets of 38% and 42% of the joint ventures totals as of
December 31, 1997 and 1996 and revenues of 50%, 48% and 49% of the 1997, 1996
and 1995 joint ventures totals, respectively. Those statements were audited by
other auditors whose reports have been furnished to us and our opinion, insofar
as it relates to the amounts included for those entities as of December 31, 1997
and 1996 and for each of the three years in the period ended December 31, 1997,
is based solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Cousins Properties Incorporated and consolidated
entities as of December 31, 1997 and 1996 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1997 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 16, 1998
<PAGE>
Cousins Properties Incorporated and Consolidated Entities
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Results of Operations For The Three Years Ended December 31, 1997
General. Historically, the Company's financial results have been
significantly affected by sale transactions and the fees generated by, and
start-up operations of, major real estate developments, which transactions and
developments do not necessarily recur. Accordingly, the Company's historical
financial statements may not be indicative of future operating results. The
notes referenced in the discussion below are the "Notes to Consolidated
Financial Statements" included in this annual report.
Rental Property Revenues and Operating Expenses. Rental property revenues
increased from $19,348,000 in 1995 to $33,112,000 and $62,252,000 in 1996 and
1997, respectively. Rental property revenues from the Company's office portfolio
increased approximately $19,834,000 in 1997 due primarily to the acquisition of
two office buildings, the addition of two new office buildings which became
operational for financial reporting purposes during 1996, and one medical office
building which became partially operational for financial reporting purposes
during 1997. Rental property revenues from 101 Independence Center and 615
Peachtree Street, two office buildings which were acquired in December 1996 and
August 1996, respectively, contributed to the increase in 1997 by $10,844,000
and $1,578,000, respectively. Two office buildings, 100 and 200 North Point
Center East, which became operational for financial reporting purposes in April
1996 and November 1996, respectively, increased rental property revenues in 1997
approximately $1,186,000 and $2,354,000, respectively. Presbyterian Medical
Plaza at University, which became partially operational in August 1997,
contributed approximately $477,000 to rental property revenues in 1997.
The Wildwood Training Facility also favorably impacted the rental property
revenues recognized from the Company's office portfolio by approximately
$3,319,000 in 1997. Effective January 1, 1997, the Wildwood Training Facility is
being accounted for as an owned property by the Company (see Note 3).
Rental property revenues from the Company's retail portfolio increased
approximately $9,509,000 in 1997. The increase was due primarily to new retail
centers or expansions of existing retail centers which became operational for
financial reporting purposes during 1996 as follows (1997 increase): Colonial
Plaza MarketCenter in March 1996 ($3,041,000), Greenbrier MarketCenter in
October 1996 ($4,059,000), Los Altos MarketCenter in November 1996 ($2,746,000),
the expansion of Presidential MarketCenter in June 1996 ($956,000), the
expansion of North Point MarketCenter in December 1996 ($524,000) and Mansell
Crossing Phase II in March 1996 ($619,000). (The Company does not own Mansell
Crossing Phase I.) Rivermont Station, which became operational for financial
reporting purposes in February 1997 but was subsequently sold on July 1, 1997
(see Note 8), increased rental property revenues approximately $644,000.
The tax-deferred exchange of Lawrenceville MarketCenter in November 1996
partially offset the foregoing increases in rental property revenues by
$3,027,000 in 1997. Also the sale of Lovejoy Station on July 1, 1997 (see Note
8) negatively impacted rental property revenues by approximately $297,000.
Rental property revenues from the Company's office portfolio increased
approximately $4,211,000 in 1996. The aforementioned two new office buildings
and two acquisitions of existing office buildings also favorably impacted 1996
rental property revenues. The 100 and 200 North Point Center East office
buildings increased rental property revenues $1,554,000 and $270,000,
respectively. The acquisitions of 615 Peachtree Street and 101 Independence
Center also contributed to the increase by $1,057,000 and $886,000,
respectively.
Rental property revenues from the Company's retail portfolio increased
approximately $9,887,000 in 1996. The increase in 1996 was due in part to
increased rental property revenues from five retail centers, Lawrenceville
MarketCenter ($2,714,000), Lovejoy Station ($712,000), Colonial Plaza
MarketCenter ($3,366,000), Presidential MarketCenter Phase II ($727,000) and
Greenbrier MarketCenter ($872,000). Three other centers also favorably impacted
1996 results by somewhat less than the aforementioned five retail centers:
Mansell Crossing Phase II rental property revenues increased approximately
$571,000, North Point MarketCenter rental property revenues increased
approximately $518,000, and Los Altos MarketCenter rental property revenues
increased approximately $336,000. Rental property revenues were negatively
impacted by approximately $278,000 in 1996 due to the termination of one tenant
at Perimeter Expo in February 1996 which was replaced by a better credit tenant
whose lease commenced in August 1996.
Rental property revenues from 24 acres of the North Point land being ground
leased to freestanding users also increased in 1996 by approximately $347,000.
Approximately 11 of the total 24 acres of leases began generating income
throughout 1995.
Rental property operating expenses increased from $4,681,000 in 1995 to
$7,616,000 and $15,371,000 in 1996 and 1997, respectively. The increases in 1996
and 1997 were primarily related to the occupancy of the retail power centers,
the 100 and 200 North Point Center East office buildings and Presbyterian
Medical Plaza at University, as well as the acquisitions of the 615 Peachtree
Street and 101 Independence Center office buildings and the reclassification of
the Wildwood Training Facility as discussed above.
Development Income. Development income decreased from $3,515,000 in 1995 to
$1,660,000 in 1996 and then increased to $3,123,000 in 1997. Development income
recognized by the Company's retail division from third party retail developments
increased approximately $1,324,000 in 1997. Development income was also
favorably impacted by $622,000 from the fee development of Total Systems'
corporate headquarters in Columbus, Georgia. Partially offsetting the foregoing
increases in development income in 1997 was a decrease in development income
received from the Dusseldorf project of approximately $542,000 (see Note 5).
The decrease in development income in 1996 was due primarily to a decrease
in the recognition of development income from the Dusseldorf joint venture's
office building project ($2,604,000 in 1995 and $777,000 in 1996) (see Note 5).
Also contributing to the decrease in 1996 was a decrease of approximately
$140,000 in development fees received from the Emory Conference Center, a third
party development. Partially offsetting the decrease in 1996 was an increase in
development fees from Wildwood Associates (approximately $334,000) which was
attributed to development of three new office buildings in Wildwood Office Park,
the 4100, 4200 and 4300 Wildwood Parkway Buildings.
Management Fees. Management fees increased from $2,213,000 in 1995 to
$2,801,000 and $3,448,000 in 1996 and 1997, respectively. The increases in both
1996 and 1997 were due to the acquisition of the management contracts of The Lea
Richmond Company in July 1996 (increases of approximately $395,000 and $491,000,
respectively). Management fees also increased in 1996 and 1997 due to lease-up
of the projects from which management fees are received.
Leasing and Other Fees. Leasing and other fees decreased from $2,156,000 in
1995 to $1,558,000 and $720,000 in 1996 and 1997, respectively. The decrease in
leasing and other fees in 1997 was due in part to a decrease of approximately
$843,000 from leasing fees related to Wildwood Office Park, primarily related to
fees received from the leasing of the 4100 and 4300 Wildwood Parkway Buildings.
Leasing and other fees recognized by the Company's retail division from third
party developments also decreased approximately $305,000 in 1997. The decrease
in 1997 was partially offset by the recognition of approximately $411,000 of
leasing fees from the Company's newly formed venture, Cousins LORET Venture,
L.L.C. (see Note 5).
The decrease in leasing and other fees in 1996 was due primarily to a
decrease of approximately $567,000 in leasing and other fees recognized by the
Company's retail division from third party retail developments. Also
contributing to the decrease in 1996 was a decrease of approximately $327,000 in
leasing fee income from NationsBank Plaza and a decrease of approximately
$228,000 in leasing fee income from a third party office project. Partially
offsetting the decrease in 1996 was an increase of approximately $540,000 from
leasing fees related to Wildwood Office Park.
Residential Lot and Outparcel Sales and Cost of Sales. Residential lot and
outparcel sales increased from $9,040,000 in 1995 to $14,145,000 in 1996 and
then decreased to $12,847,000 in 1997. The decrease in 1997 is due primarily to
a decrease in outparcel sales by CREC and one of its subsidiaries from
$3,951,000 in 1996 to $2,619,000 in 1997 resulting from the sale of eight
outparcels in 1996 and five outparcels in 1997. The decrease was partially
offset by an increase in residential lot sales from $10,194,000 in 1996 to
$10,228,000 in 1997. The number of lots sold increased from 227 lots in 1996 to
260 lots in 1997.
The increase in 1996 is due primarily to an increase in outparcel sales by
CREC and one of its subsidiaries from $525,000 in 1995 to $3,951,000 in 1996
resulting from the sale of one outparcel in 1995 and eight outparcels in 1996.
An increase in residential lot sales from $8,515,000 to $10,194,000 also
contributed to the increase in 1996. The number of lots sold increased from 183
lots in 1995 to 227 lots in 1996.
Residential lot and outparcel cost of sales increased from $8,407,000 in
1995 to $13,676,000 in 1996 and then decreased to $11,917,000 in 1997. The
increase in 1996 and decrease in 1997 were due to the aforementioned increases
and decreases in sales.
Interest and Other Income. Interest and other income increased from
$4,764,000 in 1995 to $5,256,000 in 1996 and then decreased to $3,609,000 in
1997. The decrease in interest and other income in 1997 was due primarily to the
reclassification of the Wildwood Training Facility Mortgage Note Receivable to
Operating Properties (see Note 3), which caused a decrease of approximately
$1,591,000 in interest income. Also contributing to the decrease in 1997 was a
decrease of approximately $351,000 in interest income recognized from temporary
investments. During 1996, the Company recognized interest income on temporary
investments made with proceeds received from the CSC Associates, L.P. financing
(see Note 4). No similar amounts were invested in 1997. Partially offsetting the
aforementioned decreases was an increase in interest income of approximately
$369,000 recognized from the Daniel Realty Company Note Receivable (see Note 3).
The increase in 1996 was due to an increase in interest income received
from temporary investments made with proceeds received from the aforementioned
CSC Associates, L.P. financing completed in 1996.
Income From Unconsolidated Joint Ventures. (All amounts reflect the
Company's share of joint venture income.) Income from unconsolidated joint
ventures increased from $14,113,000 in 1995 to $17,204,000 in 1996 and then
decreased to $15,461,000 in 1997.
Income from CSC Associates, L.P. increased from $7,308,000 in 1995 to
$7,978,000 and $9,284,000 in 1996 and 1997, respectively. The increases in both
1996 and 1997 were due to the continued lease-up of NationsBank Plaza. Results
in 1997 also increased due to the increase in rental income from a tenant whose
increase in rental rate did not require straight-lining under Statement of
Financial Accounting Standards No. 13. Also favorably impacting 1997 results was
a decrease in depreciation and amortization in 1997 of approximately $217,000
due to certain deferred leasing and marketing costs and furniture and equipment
becoming fully amortized during 1997.
Income from Wildwood Associates increased from $2,942,000 in 1995 to
$4,245,000 in 1996 and then decreased to $1,903,000 in 1997. Results in 1997
were negatively impacted by an increase in interest expense of approximately
$1,630,000. This increase was due primarily to the financing of the 3200 Windy
Hill Road Building which contributed approximately $2,773,000 to the increase in
interest expense in 1997. On December 16, 1996, Wildwood Associates completed
the financing of this building with a $70 million non-recourse mortgage note
payable at an 8.23% interest rate and a maturity of January 1, 2007. Concurrent
with the financing, Wildwood Associates paid down its line of credit to $0 which
partially offset the increase in interest expense by approximately $846,000.
Interest expense also increased due to the financing of the 4100 and 4300
Wildwood Parkway Buildings which increased interest expense $901,000. On March
20, 1997, Wildwood Associates completed the financing of these two buildings
with a $30 million non-recourse mortgage note payable at a 7.65% interest rate
and a term of fifteen years. In conjunction with this financing and a portion of
the aforementioned $70 million financing of the 3200 Windy Hill Road Building,
during the first quarter of 1997, Wildwood Associates made non-operating cash
distributions of $12.5 million to each partner and paid the entire calendar year
1997 operating distribution of $4.5 million to each partner. Wildwood Associates
used the remaining loan proceeds and the operating cash flow for the balance of
1997 to complete the 4200 Wildwood Parkway Building.
Partially offsetting the increase in interest expense in 1997 was a
decrease of approximately $475,000 in interest expense related to the Summit
Green Building. Effective December 1, 1996, Wildwood Associates disposed of its
interest in this building in exchange for cancellation of the related mortgage
debt. In addition, an increase in interest capitalization also partially offset
the increase in interest expense by $473,000.
Income before depreciation, amortization and interest expense from the 4100
and 4300 Wildwood Parkway Buildings favorably impacted results in 1997 by
approximately $840,000. The 4100 and 4300 Wildwood Parkway Buildings became
partially operational for financial reporting purposes in March 1996. Lease-up
of the 2300 and 2500 Windy Ridge Parkway Buildings also increased income before
depreciation, amortization and interest expense by $152,000 and $319,000,
respectively. Income before depreciation, amortization and interest expense from
the 3200 Windy Hill Road Building decreased approximately $1,222,000 due
primarily to the effect of the straight-lining of rental revenues in accordance
with Statement of Financial Accounting Standards No. 13, which decreased rental
revenues by approximately $1,386,000. The disposition of the Summit Green
Building, as discussed above, decreased income before depreciation, amortization
and interest expense by approximately $896,000.
Results in 1996 were favorably impacted by a decrease in interest expense
of approximately $883,000 which was due primarily to increased interest
capitalization and to the refinancings of two mortgage notes in December 1995.
The 4100 and 4300 Wildwood Parkway Buildings becoming partially operational for
financial reporting purposes in March 1996 increased income before depreciation,
amortization and interest expense by approximately $877,000 in 1996. The income
before depreciation, amortization and interest expense of the 2500 Windy Ridge
Parkway Building decreased approximately $720,000 in 1996, primarily due to the
expiration of a tenant's lease which was replaced with another tenant with less
square footage at a lower rate. Additionally, increases in income before
depreciation, amortization and interest expense from the 2300 Windy Ridge
Parkway Building contributed to the increase in 1996 by approximately $276,000.
Income from Haywood Mall increased from $2,963,000 in 1995 to $3,538,000
and $3,648,000, in 1996 and 1997, respectively. The increase in 1996 was due to
an increase of approximately $798,000 in 1996 in income before depreciation,
amortization and interest expense resulting from the completion and lease-up of
an expansion of Haywood Mall. This increase was partially offset by an increase
in depreciation and amortization of approximately $201,000 in 1996, which was
also due to the expansion of Haywood Mall.
Income from Temco Associates increased from a loss of $36,000 in 1995 to
income of $700,000 in 1996 and then decreased to income of $11,000 in 1997.
During 1996, Temco Associates exercised portions of the option related to the
fee simple interest to purchase 375 acres of land which it simultaneously sold.
CREC's share of the gain on these sales was approximately $713,000. There were
no similar sales in 1995 or 1997.
Income from Hickory Hollow Associates decreased from $257,000 in 1995 to a
loss of $11,000 in 1996 and a loss of $8,000 in 1997. The decreases in 1996 and
1997 were due to two outparcel sales in 1995 and none in 1996 and 1997.
Income from CC-JM II Associates increased from $0 in 1995 to $141,000 in
1996 and then decreased to $113,000 in 1997. The increase in 1996 was due to the
John Marshall-II office building becoming fully operational for financial
reporting purposes in late January 1996.
General and Administrative Expenses. General and administrative expenses
increased from $7,668,000 in 1995 to $9,148,000 and $12,717,000 in 1996 and
1997, respectively. The increases in 1997 and 1996 were primarily related to the
Company's expansion and the acquisition of The Lea Richmond Company and The
Richmond Development Company in July 1996. The increase in 1997 was also due to
approximately $397,000 of additional expense being accrued in 1997 for higher
than anticipated estimates of runoff and other expenses associated with the
termination of the Company's partially self-insured medical plan in December
1996.
Depreciation and Amortization. Depreciation and amortization increased from
$4,516,000 in 1995 to $7,219,000 and $14,046,000 in 1996 and 1997, respectively.
Both the 1996 and 1997 increases were due primarily to the retail centers
becoming operational as discussed above. The 1996 and 1997 increases were also
due to the 100 and 200 North Point Center East office buildings becoming
operational and the acquisition of the 101 Independence Center and 615 Peachtree
Street office buildings as discussed above. Both the reclassification of the
Wildwood Training Facility Mortgage Note Receivable to Operating Properties, as
well as Presbyterian Medical Plaza at University becoming partially operational
in August 1997 increased depreciation and amortization in 1997.
Stock Appreciation Right Expense. Stock appreciation right expense
increased from $1,298,000 in 1995 to $2,154,000 in 1996 and then decreased to
$204,000 in 1997. This non-cash item is primarily related to the number of stock
appreciation rights outstanding and the Company's stock price. A reduction in
the number of stock appreciation rights outstanding due to exercises which
occurred since the first quarter of 1996 contributed to the decrease in the
stock appreciation right expense. The Company's stock price was $29.3125,
$28.125 and $20.25 per share at December 31, 1997, 1996 and 1995, respectively.
Interest Expense. Interest expense increased from $687,000 in 1995 to
$6,546,000 and $14,126,000 in 1996 and 1997, respectively. Interest expense
before capitalization increased from $5,760,000 in 1995 to $12,194,000 and
$17,293,000 in 1996 and 1997, respectively, due to higher debt levels. The
amount of interest capitalization (a reduction of interest expense), which
increases and decreases with increases and decreases in projects under
development, increased from $5,073,000 in 1995 to $5,648,000 in 1996 which
partially offset the overall increase in interest expense in 1996, and then
decreased to $3,167,000 in 1997 which contributed to the increase in interest
expense in 1997.
Property Taxes on Undeveloped Land. Property taxes on undeveloped land
increased from $977,000 in 1995 to $1,301,000 in 1996 and then decreased to
$606,000 in 1997. The decrease in 1997 was primarily due to favorable
settlements of property taxes on the Company's land related to 1994, 1995 and
1996 tax years, which had been under appeal. The increase in 1996 was due
primarily to an increase in property taxes on the land the Company owns in
Wildwood Office Park due to a property tax reassessment ($254,000 increase).
Other Expenses. Other expenses decreased from $1,688,000 in 1995 to
$1,567,000 in 1996 and then increased to $2,695,000 in 1997. The increase in
1997 and decrease in 1996 were due to an increase and decrease in predevelopment
expenses, respectively.
Provision (Benefit) for Income Taxes From Operations. The provision
(benefit) for income taxes from operations decreased from a provision of
$747,000 in 1995 to a benefit of $1,703,000 in 1996, which benefit decreased to
a benefit of $1,527,000 in 1997. The decrease in the benefit for income taxes
from operations in 1997 was due to a decrease of $463,000 in CREC and its
subsidiaries' loss before income taxes and gain on sale of investment
properties, which decrease was due to the aforementioned increases in
development income recognized by CREC and its subsidiaries. Partially offsetting
the increase in development income was an increase in predevelopment expense and
a decrease in intercompany development and leasing fees recognized in 1997.
Certain development and leasing fees recorded on CREC and its subsidiaries'
books are intercompany fee income which is eliminated in consolidation, but the
tax effect is not.
The decrease in the 1996 provision (benefit) for income taxes from
operations was due primarily to a decrease of $7,229,000 in CREC and its
subsidiaries' income before income taxes and gain on sale of investment
properties which resulted in a loss for CREC and its subsidiaries and hence an
income tax benefit. The decrease in CREC and its subsidiaries' income before
income taxes and gain on sale of investment properties was due primarily to a
decrease in development and leasing fees received by CREC and its subsidiaries
including a decrease in development fee income from the Dusseldorf project as
discussed above. In addition, CREC and its subsidiaries' income before income
taxes and gain on sale of investment properties was reduced by increases in the
stock appreciation right expense in 1996. Intercompany development and leasing
fees also decreased in 1996.
Gain on Sale of Investment Properties. Gain on sale of investment
properties, net of applicable income tax provision was $1,862,000, $12,804,000
and $5,972,000 in 1995, 1996 and 1997, respectively. The 1997 gain included the
following: the January 1997 sale of land at the Company's North Point
development ($2.4 million gain), the July 1997 sale of Lovejoy Station and
Rivermont Station (see Note 8) ($3.0 million gain), and the December 1997 sale
of 30 acres of land adjacent to Lawrenceville MarketCenter (a retail center
formerly owned by the Company) ($.6 million gain).
The 1996 gain included the following: the November 1996 sale of
Lawrenceville MarketCenter ($10.6 million gain), three North Point land sales in
May, October and December 1996 ($1.96 million gain), the July 1996 sale of the
Company's 50% interest in the Norfolk parking agreement ($.4 million gain) (see
Note 5), and the November 1996 sale of a land parcel located in midtown Atlanta
($.1 million loss). Liquidity and Capital Resources:
Financial Condition. The Company's debt (including its pro rata share of
unconsolidated joint venture debt) was 28% of total market capitalization at
December 31, 1997. As discussed in Note 4, the Company amended and extended the
maturity date of its $100 million line of credit to June 29, 1998. The Company
and certain of its unconsolidated joint ventures completed three new financings
in 1997: the $30 million non-recourse financing of the 4100 and 4300 Wildwood
Parkway Buildings, the $25 million non-recourse financing of the 100 and 200
North Point Center East office buildings, and the $30 million non-recourse
financing of the Two Live Oak Center office building (see Note 4). As discussed
in Note 8, a $20.1 million property sale was completed on July 1, 1997, and as
discussed in Note 6, the sale of 2,150,000 shares of common stock for net
proceeds of approximately $64.1 million was completed in December 1997. As a
result of these transactions, there were no borrowings under the Company's $100
million line of credit as of December 31, 1997. In addition, Cousins LORET
Venture, L.L.C. received a commitment for the $70 million non-recourse financing
of The Pinnacle office building which is expected to close by March 1998 and be
fully funded by December 1998 (see Note 4).
The Company has development and acquisition projects in various planning
stages. The Company currently intends to finance these projects and projects
currently under construction discussed in Note 8, by using the excess proceeds
from the December 1997 sale of common stock, its existing lines of credit
(increasing those lines of credit as required), and long-term non-recourse
financing on the Company's unleveraged projects and other financings as market
conditions warrant. In September 1996, the Company filed a shelf registration
statement with the Securities and Exchange Commission ("SEC") for the offering
from time to time of up to $200 million of common stock, warrants to purchase
common stock and debt securities, of which approximately $132 million remains
available at December 31, 1997. As discussed above and in Note 6, the Company
sold 2,150,000 shares of common stock in December 1997 at $31.5625 per share
pursuant to the above shelf registration statement.
The executive branch of the U.S. Government has proposed certain changes to
the Internal Revenue Code which in their current form may affect the ability of
REITs to engage in certain types of activities in which they are not currently
engaged. At this time, it is uncertain whether the proposed legislation will be
passed by Congress, and if passed, what its final form and impact will be on the
Company's ability to engage in new activities.
Cash Flows. Net cash provided by operating activities increased from $37.7
million in 1995 to $57.1 million and $58.0 million in 1996 and 1997,
respectively. The increases resulted primarily from an improvement in income
before gain on sale of investment properties of $3.7 million and $3.1 million in
1996 and 1997, respectively. Additionally, depreciation and amortization
increased $2.9 million and $6.8 million in 1996 and 1997, respectively.
Residential lot and outparcel cost of sales which contributed approximately $5.0
million of the increase in 1996, partially offset the increase in 1997 by a
decrease of approximately $1.7 million. Operating distributions from
unconsolidated joint ventures also favorably impacted 1996 and 1997 with
increases of $3.6 million and $2.3 million, respectively. Changes in other
receivables, accounts payable and accrued liabilities which increased net cash
provided by operating activities in 1996 by approximately $7.9 million,
decreased approximately $10.9 million in 1997 which partially offset the
increase in net cash provided by operating activities in 1997. An increase in
income from unconsolidated joint ventures of approximately $3.1 million
partially offset the increase in net cash provided by operating activities in
1996.
Net cash used in investing activities increased from $89.4 million in 1995
to $124.7 million in 1996 and then decreased to $55.6 million in 1997. The
decrease in property acquisition and development expenditures of approximately
$81.5 million in 1997, as a result of the Company having a lower level of
projects under construction, was the primary component of the decrease in net
cash used in investing activities in 1997. Also contributing to the decrease was
a decrease in investment in notes receivable of approximately $21.5 million in
1997. The Company temporarily invested approximately $18 million of proceeds
from the $80 million CSC Associates, L.P. financing completed in 1996 in a note
receivable due from Wildwood Associates. No similar investment occurred in 1997.
Non-operating distributions from unconsolidated joint ventures increased $13.3
million due primarily to distributions from Wildwood Associates of $10 million
in January 1997 from the proceeds of the financing of the 3200 Wildwood Plaza
Building completed in December 1996 and $2.5 million from the proceeds of the
financing of the 4100 and 4300 Wildwood Parkway Buildings in March 1997. The
Company also received $2.2 million of distributions from Norfolk Hotel
Associates (see Note 5). The decrease in collection of notes receivable of
approximately $24.2 million in 1997 partially offset the above decreases in net
cash used in investing activities. Net cash provided by sales activities
decreased approximately $15.7 million which was due to a decrease in net
proceeds received from the sale of Rivermont Station and Lovejoy Station in 1997
as compared to the sale of Lawrenceville MarketCenter in 1996. Investment in
unconsolidated joint ventures increased approximately $8.6 million in 1997 which
also offset the decrease in net cash used in investing activities. The Company
contributed approximately $8.5 million to the newly formed Cousins LORET
Venture, L.L.C. (see Note 5).
The increase in net cash used in investing activities in 1996 resulted
primarily from an increase in property acquisition and development expenditures
of approximately $74.9 million. The change in other assets also added to the
increase in net cash used in investing activities by approximately $5.0 million
which was due in part to goodwill from the July 1996 acquisition of The Lea
Richmond Company and The Richmond Development Company and deferred financing
costs related to the $80 million financing (see Note 4). The increase in net
cash used in investing activities in 1996 was partially offset by a decrease of
$9.1 million in investment in unconsolidated joint ventures. The Company
contributed $5.8 million to Haywood Mall in 1995 to fund the expansion of the
mall and $2.6 million to CC-JM II Associates in 1995 to fund its share of the
equity in the partnership. No similar contributions were made in 1996. Also
partially offsetting the increase in net cash used in investing activities in
1996 was an increase in the net cash provided by sales activities of $34.5
million which was primarily related to the sale of Lawrenceville MarketCenter in
November 1996.
Net cash provided by financing activities increased from $49.8 million in
1995 to $67.7 million in 1996 and then decreased to $28.7 million in 1997. The
decrease in 1997 was primarily attributable to a decrease of $106.8 million in
proceeds from other notes payable. During 1996, the Company completed two
financings for approximately $129.5 million: the $80 million CSC Associates,
L.P. financing and the $49.5 million assumption of the 101 Independence Center
mortgage note payable, as compared to one financing in 1997 for approximately
$25 million of the 100 and 200 North Center East office buildings (see Note 4).
The repayment of the line of credit increased approximately $50.8 million which
also decreased the cash flows from financing activities. An increase in the
total dividends paid per share from $1.12 in 1996 to $1.29 in 1997 and an
increase in the number of shares outstanding also contributed to the decrease in
net cash provided by financing activities as dividends paid increased $5.7
million in 1997. Partially offsetting the above decreases were increases in the
proceeds from the line of credit of approximately $67.0 million and common stock
sold of approximately $59.7 million. In December 1997, the Company completed the
sale of 2,150,000 shares of common stock which raised net proceeds of
approximately $64.1 million (see Note 6). The increase in 1996 was attributable
to an increase in proceeds from other notes payable of approximately $51.7
million. In 1995, the Company completed three financings for approximately $79.5
million as compared to two financings in 1996 for approximately $129.5 million.
The proceeds from the line of credit decreased $30.9 million in 1996. The
decrease in 1996 was due to the use of the proceeds from the $129.5 million of
financing instead of the line of credit. The repayment of the line of credit
increased $1.3 million in 1996. Dividends paid increased $4.2 million in 1996
due to an increase in the number of shares outstanding and an increase in the
total dividends paid per share from $.99 in 1995 to $1.12 per share in 1996. The
common stock sold increased $6.2 million in 1996 due to increased reinvestment
of dividends by stockholders through the Company's dividend reinvestment plan
and increased stock option exercises. Repayment of other notes payable increased
$3.6 million in 1996 due to the scheduled amortization of the financings
completed in 1995 and 1996. Effects of Inflation
The Company attempts to minimize the effect of inflation on income from
operating properties by the use of rents tied to tenants' sales, periodic
fixed-rent increases and increases based on cost-of-living adjustments, and/or
pass-through of operating cost increases to tenants.
<PAGE>
Cousins Properties Incorporated and Consolidated Entities
MARKET AND DIVIDEND INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
The high and low sales prices for the Company's common stock and cash
dividends declared per share were as follows:
1997 Quarters 1996 Quarters
---------------------------------------- ----------------------------------------
First Second Third Fourth First Second Third Fourth
----- ------ ----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High $28-1/4 $29-1/8 $30 $33-3/4 $21 $20 $24-1/2 $28
Low 24-1/4 24-1/2 26-3/8 27-1/4 18-3/8 18-3/8 18-7/8 21-7/8
Dividends Declared .31 .31 .31 .36 .27 .27 .27 .31
Payment Date 2/24/97 5/30/97 8/26/97 12/22/97 2/22/96 5/30/96 8/26/96 12/23/96
</TABLE>
The Company's stock trades on the New York Stock Exchange (ticker symbol
CUZ). At December 31, 1997, there were 1,304 stockholders of record.
ABOUT YOUR DIVIDENDS
- --------------------------------------------------------------------------------
Timing of Dividends - Cousins normally pays regular dividends four times
each year in February, May, August and December.
Differences Between Net Income and Cash Dividends Declared - Cousins'
current intention is to distribute 100% of its taxable income and thus incur no
corporate income taxes. However, Consolidated Net Income for financial reporting
purposes and Cash Dividends Declared will generally not be equal for the
following reasons:
a. There will continue to be considerable differences between Consolidated
Net Income as reported to stockholders (which includes the income of a
consolidated non-REIT entity that pays corporate income taxes) and Cousins'
taxable income. The differences are enumerated in Note 7 of "Notes to
Consolidated Financial Statements."
b. For purposes of meeting REIT distribution requirements, dividends may be
applied to the calendar year before or after the one in which they are declared.
The differences between dividends declared in the current year and dividends
applied to meet current year REIT distribution requirements are enumerated in
Note 6 of "Notes to Consolidated Financial Statements."
Capital Gains Dividends - In some years, as it did in 1997, 1996 and 1995,
Cousins will have taxable capital gains, and Cousins currently intends to
distribute 100% of such gains to stockholders. The Form 1099-DIV sent by Cousins
to stockholders of record each January shows total dividends paid (including the
capital gains dividends) as well as that which should be reported as a capital
gain (see Note 6 of "Notes to Consolidated Financial Statements"). For
individuals, the capital gain portion of the dividends is subtracted from total
dividends on Schedule B of IRS Form 1040 and reported separately on Schedule D,
line 13, column (g) of IRS Form 1040 as a capital gain.
Tax Preference Items and "Differently Treated Items" - Internal Revenue
Code Section 59(d) requires that certain corporate tax preference items and
"differently treated items" be passed through to a REIT's stockholders and
treated as tax preference items and items of adjustment in determining the
stockholder's alternative minimum taxable income. The amount of this adjustment
is included in Note 6 of "Notes to Consolidated Financial Statements."
Tax preference items and adjustments are includable in a stockholder's
income only for purposes of computing the alternative minimum tax. These
adjustments will not affect a stockholder's tax filing unless that stockholder's
alternative minimum tax is higher than that stockholder's regular tax.
Stockholders should consult their tax advisors to determine if the adjustment
reported by Cousins affects their tax filing. Many stockholders will find that
the adjustment reported by Cousins will have no effect on their tax filing
unless they have other large sources of alternative minimum tax adjustments or
tax preference items.
<PAGE>
Cousins Properties Incorporated and Consolidated Entities
- --------------------------------------------------------------------------------
SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Selected quarterly information for the two years ended December 31, 1997 ($ in
thousands, except per share amounts):
<TABLE>
<CAPTION>
Quarters
----------------------------------------
First Second Third Fourth
----- ------ ----- ------
1997:
<S> <C> <C> <C> <C>
Revenues $20,291 $21,141 $22,233 $22,334
Income from unconsolidated joint ventures 3,582 3,467 3,737 4,675
Gain on sale of investment properties, net of applicable income
tax provision 2,396 2,974 602
Net income 9,624 7,455 10,874 9,324
Basic net income per share .33 .26 .37 .31
Diluted net income per share .33 .25 .37 .31
1996:
Revenues 13,223 14,155 12,812 18,342
Income from unconsolidated joint ventures 4,394 4,170 4,362 4,278
Gain on sale of investment properties, net of applicable income
tax provision -- 620 397 11,787
Net income 7,298 8,549 7,039 18,130
Basic net income per share .26 .30 .25 .63
Diluted net income per share .26 .30 .24 .62
</TABLE>
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
COUNSEL
King & Spalding
Troutman Sanders
TRANSFER AGENT AND REGISTRAR
First Union National Bank
Shareholder Services Group
Two First Union Center, M-12
Charlotte, North Carolina 28288-1154
Telephone Number: 1-800-829-8432
FAX Number: 1-704-374-6987
DIVIDEND REINVESTMENT PLAN
The Company offers its stockholders the opportunity to purchase additional
shares of common stock through the Dividend Reinvestment Plan with purchases at
95% of current market value. A copy of the Plan prospectus and an enrollment
card may also be obtained by calling or writing to the Company.
FORM 10-K AVAILABLE
The Company's annual report on Form 10-K and interim reports on Form 10-Q are
filed with the Securities and Exchange Commission. Copies are available without
exhibits free of charge to any person who is a record or beneficial owner of
common stock upon written request to the Company at 2500 Windy Ridge Parkway,
Suite 1600, Atlanta, Georgia 30339-5683.
INVESTOR RELATIONS CONTACT
Mark B. Riley, Vice President
<PAGE>
Cousins Properties Incorporated and Consolidated Entities
DIRECTORS
T. G. Cousins
Chairman of the Board and
Chief Executive Officer
Richard W. Courts, II
Chairman
Atlantic Investment Company
Terence C. Golden
President and Chief Executive Officer
Host Marriott Corporation
Boone A. Knox
Chairman
Merry Land & Investment Company, Inc.
William Porter Payne
Vice Chairman
NationsBank
Richard E. Salomon
President and Managing Director
Spears, Benzak, Salomon & Farrell
D. W. Brooks
Director Emeritus
Henry C. Goodrich
Director Emeritus
CORPORATE*
T. G. Cousins
Chairman of the Board and
Chief Executive Officer
Daniel M. DuPree
President and Chief Operating
Officer
Kelly H. Barrett
Senior Vice President - Finance
George J. Berry
Senior Vice President
Tom G. Charlesworth
Senior Vice President,
General Counsel and Secretary
Peter A. Tartikoff
Senior Vice President and
Chief Financial Officer
Mark B. Riley
Vice President - Acquisitions and
Investor Relations
Lisa R. Simmons
Director of Corporate
Communications
OFFICE DIVISION*
Craig B. Jones
Senior Vice President
John L. Murphy
Senior Vice President
Jack A. LaHue
Senior Vice President - Asset
Management
John S. Durham
Vice President - Leasing
Walter L. Fish
Vice President - Leasing
PROPERTY MANAGEMENT*
Terry M. Hampel
Vice President - Retail Property
Management
Dara J. Nicholson
Vice President - Office Property
Management
LAND DIVISION**
(Cousins Neighborhoods)
Bruce E. Smith
President
RETAIL DIVISION**
(Cousins MarketCenters, Inc.)
Joel T. Murphy*
President
Ronald B. Pfohl
Senior Vice President -Leasing
John D. Hopkins
Senior Vice President - Western Region
Robert A. Manarino
Senior Vice President - Western Region
Robert S. Wordes
Senior Vice President - Asset
Management
William I. Bassett
Vice President - Development
Michael I. Cohn
Vice President - Development
Michael J. Lant
Vice President - Development
Kevin D. Doherty
Vice President-Development
Western Region
Hans F. Kuhlmann
Vice President - Midwest Region
DEVELOPMENT AND
CONSTRUCTION DIVISION**
W. James Overton*
Senior Vice President -
Development
James D. Dean
Vice President - Development
James F. George
Vice President - Development
John N. Goff
Vice President - Development
Lloyd P. Thompson, Jr.
Vice President - Development
William D. Varner
Vice President - Development
MEDICAL OFFICE DIVISION***
(Cousins/Richmond)
Lea Richmond III
President
John S. McColl
Senior Vice President
David J. Rubenstein
Senior Vice President
Thomas H. Sawyer
Senior Vice President
S. Rox Green
Vice President
*Officers of Cousins Properties Incorporated, as well as Cousins Real Estate
Corporation and/or Cousins MarketCenters, Inc.
**Officers of Cousins Real Estate Corporation and/or Cousins MarketCenters,
Inc.
***Officers of Cousins Properties Incorporated
EXHIBIT 21
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
SUBSIDIARIES OF THE REGISTRANT
DECEMBER 31, 1997
At December 31, 1997, the Registrant had no 100% owned subsidiaries.
At December 31, 1997, the financial statements of the following
entities were consolidated with those of the Registrant in the Consolidated
Financial Statements incorporated herein:
Cousins Real Estate Corporation and subsidiaries (100% of non-
voting common stock and 100% of preferred stock owned by
Registrant); subsidiaries include Cousins MarketCenters,
Inc. (100% owned by Cousins Real Estate Corporation)
Rocky Creek Properties, Inc. & MT&E - Macon-Harris (75% owned
by Registrant)
Perimeter Expo Associates, L.P. (90% owned by Registrant
and 10% owned by Cousins MarketCenters, Inc.)
Cousins, Inc. (100% owned by Registrant); subsidiaries include
Cousins/Daniel, LLC*
Cousins/Myers Second Street Partners, L.L.C.*
At December 31, 1997, the Registrant and its consolidated entities had
the following significant unconsolidated subsidiaries which were not 100% owned:
CC-JM II Associates (50% owned by Registrant) C-H Associates,
Ltd. (49% owned by Cousins Real Estate Corporation) C-H
Leasing Associates (50% owned by Cousins Real Estate
Corporation) C-H Management Associates (50% owned by Cousins
Real Estate Corporation) CSC Associates, L.P. (50% owned by
Registrant) Cousins LORET Venture, L.L.C. (50% owned by
Registrant) Green Valley Associates II (50% owned by
Registrant) Haywood Mall (50% owned by Registrant) Hickory
Hollow (50% owned by Cousins Real Estate Corporation) MC
Dusseldorf Holding B.V. (10% voting interest owned by
Registrant and 40% voting interest
owned by Cousins Real Estate Corporation)
Wildwood Associates (50% owned by Registrant)
Ten Peachtree Place Associates (50% owned by Registrant)
Temco Associates (50% owned by Cousins Real Estate
Corporation)
* Registrant receives a preferred return on its capital, with minority
member receiving a portion of residual cash flow and capital
proceeds.
EXHIBIT 23(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included or incorporated by reference in this Form
10-K, into Cousins Properties Incorporated's previously filed Registration
Statements File No. 33-41927, 33-56787, 33-60350 and 333-12031.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 25, 1998
EXHIBIT 23(b)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Amendment No. 1 to the
Registration Statement (Form S-3 No. 333-12031) and related Prospectus of
Cousins Properties Incorporated, in Amendment No. 1 to the Registration
Statement (Form S-3 No. 33-60350) and related Prospectus pertaining to the
Dividend Reinvestment Plan of Cousins Properties Incorporated, in the
Registration Statement (Form S-8 No. 33-56787) and related Prospectus pertaining
to the 1989 Stock Option Plan of Cousins Properties Incorporated, and in the
Registration Statement (Form S-8 No. 33-41927) and related Prospectus pertaining
to the 1989 Stock Option Plan, 1987 Restricted Stock Plan for Outside Directors
and Incentive Stock Option Plan of Cousins Properties Incorporated of our report
dated February 2, 1998, with respect to the financial statements and schedule of
CSC Associates, L.P., included in the Form 10-K of Cousins Properties
Incorporated for the year ended December 31, 1997.
ERNST & YOUNG LLP
Atlanta, Georgia
March 25, 1998
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